10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2007

OR

¨ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from              to             

Commission file number 1-4881

AVON PRODUCTS, INC.

(Exact name of registrant as specified in its charter)

New York	13-0544597
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification No.)

1345 Avenue of the Americas, New York, N.Y. 10105-0196

(Address of principal executive offices) (Zip code)

(212) 282-5000

(Telephone Number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  x    Accelerated filer  ¨    Non-accelerated filer   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares of Common Stock (par value $.25) outstanding at June 30, 2007 was 432,647,048.

TABLE OF CONTENTS

		Page Numbers
	Part I. Financial Information
Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Income
	Three Months Ended June 30, 2007 and June 30, 2006	3
	Six Months Ended June 30, 2007 and June 30, 2006	4
	Consolidated Balance Sheets
	June 30, 2007 and December 31, 2006	5
	Consolidated Statements of Cash Flows
	Six Months Ended June 30, 2007 and June 30, 2006	6
	Notes to Consolidated Financial Statements	7-16
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17-29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30
	Part II. Other Information
Item 1.	Legal Proceedings	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 4.	Submission of Matters To A Vote of Security Holders	31-32
Item 5.	Other Information	32
Item 6.	Exhibits	32
	Signature	33

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three Months Ended June 30
In millions, except per share data	2007			2006
Net sales	$	2,306.4		$	2,058.9
Other revenue		22.4			20.6
Total revenue		2,328.8			2,079.5
Costs, expenses and other:
Cost of sales		925.0			776.5
Selling, general and administrative expenses		1,216.9			1,077.7
Operating profit		186.9			225.3
Interest expense		(28.1	)		(23.9	)
Interest income		10.3			16.7
Other expense, net		(1.2	)		(.8	)
Total other expenses		(19.0	)		(8.0	)
Income before taxes and minority interest		167.9			217.3
Income taxes		(54.2	)		(66.6	)
Income before minority interest		113.7			150.7
Minority interest		(1.0	)		.2
Net income	$	112.7		$	150.9
Earnings per share:
Basic	$	.26		$	.34
Diluted	$	.26		$	.33
Weighted-average shares outstanding:
Basic		434.85			449.36
Diluted		438.45			451.87
Cash dividends per common share	$	.185		$	.175

The accompanying notes are an integral part of these statements.

3

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Six Months Ended June 30
In millions, except per share data	2007			2006
Net sales	$	4,469.7		$	4,041.3
Other revenue		44.4			41.4
Total revenue		4,514.1			4,082.7
Costs, expenses and other:
Cost of sales		1,761.7			1,556.2
Selling, general and administrative expenses		2,327.7			2,215.0
Operating profit		424.7			311.5
Interest expense		(54.6	)		(50.4	)
Interest income		22.6			29.9
Other expense, net		(1.8	)		(2.4	)
Total other expenses		(33.8	)		(22.9	)
Income before taxes and minority interest		390.9			288.6
Income taxes		(126.6	)		(81.1	)
Income before minority interest		264.3			207.5
Minority interest		(1.6	)		(.4	)
Net income	$	262.7		$	207.1
Earnings per share:
Basic	$	.60		$	.46
Diluted	$	.60		$	.46
Weighted-average shares outstanding:
Basic		437.71			450.05
Diluted		441.09			452.24
Cash dividends per common share	$	.37		$	.35

The accompanying notes are an integral part of these statements.

4

AVON PRODUCTS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

In millions	June 30 2007			December 31 2006
Assets
Current Assets
Cash and cash equivalents	$	903.4		$	1,198.9
Accounts receivable, net		675.2			700.4
Inventories		1,030.7			900.3
Prepaid expenses and other		566.8			534.8
Total current assets		3,176.1			3,334.4
Property, plant and equipment, at cost		2,197.6			2,112.3
Less accumulated depreciation		(1,076.2	)		(1,012.1	)
		1,121.4			1,100.2
Other assets		850.0			803.6
Total assets	$	5,147.5		$	5,238.2
Liabilities and Shareholders’ Equity
Current Liabilities
Debt maturing within one year	$	907.5		$	615.6
Accounts payable		612.9			655.8
Accrued compensation		208.5			266.9
Other accrued liabilities		582.7			601.6
Sales taxes and taxes other than income		183.6			176.1
Income taxes		68.9			209.2
Total current liabilities		2,564.1			2,525.2
Long-term debt		1,160.3			1,170.7
Employee benefit plans		423.9			504.9
Long-term income taxes		177.9			55.0
Other liabilities		196.8			192.0
Total liabilities	$	4,523.0		$	4,447.8
Contingencies (Note 5)
Shareholders’ Equity
Common stock		184.3			183.5
Additional paid-in capital		1,653.5			1,549.8
Retained earnings		3,478.1			3,396.8
Accumulated other comprehensive loss		(578.1	)		(656.3	)
Treasury stock, at cost		(4,113.3	)		(3,683.4	)
Total shareholders’ equity	$	624.5		$	790.4
Total liabilities and shareholders’ equity	$	5,147.5		$	5,238.2

The accompanying notes are an integral part of these statements.

5

AVON PRODUCTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30
In millions	2007			2006
Cash Flows from Operating Activities
Net income	$	262.7		$	207.1
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		87.7			80.1
Provision for doubtful accounts		75.0			68.8
Provision for obsolescence		120.4			67.3
Share-based compensation		34.1			33.3
Deferred income taxes		9.2			(30.1	)
Asset write-off restructuring charges		.2			8.2
Other		15.8			2.6
Changes in assets and liabilities:
Accounts receivable		(28.9	)		1.7
Inventories		(220.7	)		(161.0	)
Prepaid expenses and other		(40.3	)		(22.5	)
Accounts payable and accrued liabilities		(152.1	)		106.6
Income and other taxes		(106.9	)		(32.3	)
Noncurrent assets and liabilities		(57.1	)		(40.4	)
Net cash (used) provided by operating activities		(.9	)		289.4
Cash Flows from Investing Activities
Capital expenditures		(83.7	)		(63.0	)
Disposal of assets		7.2			6.8
Acquisitions		(16.5	)		—
Purchases of investments		(24.7	)		(21.3	)
Proceeds from sale of investments		23.2			10.6
Net cash used by investing activities		(94.5	)		(66.9	)
Cash Flows from Financing Activities*
Cash dividends		(165.1	)		(160.2	)
Book overdrafts		.9			(.5	)
Debt, net (maturities of three months or less)		297.2			(374.7	)
Proceeds from debt		1.0			504.2
Repayment of debt		(6.4	)		(14.7	)
Proceeds from exercise of stock options		47.3			14.6
Excess tax benefit realized from share-based compensation		10.6			1.9
Repurchase of common stock		(410.1	)		(129.6	)
Net cash used by financing activities		(224.6	)		(159.0	)
Effect of exchange rate changes on cash and equivalents		24.5			(7.7	)
Net (decrease) increase in cash and equivalents		(295.5	)		55.8
Cash and equivalents at beginning of year		1,198.9			1,058.7
Cash and equivalents at end of period	$	903.4		$	1,114.5

* Non-cash financing activities in 2007 and 2006 included the change in fair market value of interest rate swap agreements of ($11.7) and ($19.6), respectively.

The accompanying notes are an integral part of these statements.

6

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share data)

1. ACCOUNTING POLICIES

Basis of Presentation

We prepare our unaudited interim consolidated financial statements in conformity with accounting principles generally accepted in the United States. We consistently applied the accounting policies described in our 2006 Annual Report on Form 10-K (“2006 Form 10-K”) in preparing these unaudited financial statements. In our opinion, we made all adjustments of a normal recurring nature that are necessary for a fair statement of the results for the interim periods. Results for interim periods are not necessarily indicative of results for a full year. You should read these unaudited interim consolidated financial statements in conjunction with our consolidated financial statements contained in our 2006 Form 10-K. When used in these notes, the terms “Avon,” “Company,” “we” or “us” mean Avon Products, Inc.

For interim consolidated financial statement purposes, we compute our tax provision on the basis of our estimated annual effective income tax rate, and provide for accruals under our various employee benefit plans for each quarter based on one quarter of the estimated annual expense.

We have reclassified some prior year amounts in the consolidated financial statements and accompanying notes for comparative purposes. We reclassified taxes payable of $24.9 from sales taxes and taxes other than income to long-term income taxes on the December 31, 2006 Consolidated Balance Sheet.

New Accounting Standards Implemented

Effective January 1, 2007, we adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109, (“FIN 48”). As a result of the implementation of FIN 48, we recognized an $18.3 increase in the liability for unrecognized tax benefits (including interest and penalties), which was accounted for as a reduction to the January 1, 2007 balance of retained earnings. At the adoption date, we had approximately $136 of total gross unrecognized tax benefits, of which a substantial portion would impact the effective tax rate, if recognized.

We recognize interest and penalties accrued related to unrecognized tax benefits in the provision for income taxes. At the adoption date, we had approximately $24 accrued for interest and penalties, net of tax benefit.

We file income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. As of January 1, 2007, the tax years that remain subject to examination by major tax jurisdiction for our most significant subsidiaries were as follows:

Jurisdiction	Open Years
Brazil	2001-2006
China	2003-2006
Mexico	2001-2006
Poland	2001-2006
Russia	2004-2006
United States	2004-2006

We anticipate that it is reasonably possible that the total amount of unrecognized tax benefits could decrease in the range of $60 to $75 by the end of 2007 due to the closure of tax years by expiration of the statute of limitations and audit settlements.

7

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share data)

New Accounting Standards to be Implemented

In February 2007, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment to FASB Statement No. 115, (“SFAS 159”), which permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS 159 is effective January 1, 2008 for Avon. We do not believe the adoption of SFAS 159 will have a material impact on our consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 is effective January 1, 2008 for Avon. We do not believe the adoption of SFAS 157 will have a material impact on our consolidated financial statements.

2. EARNINGS PER SHARE AND SHARE REPURCHASES

	Three Months Ended June 30				Six Months Ended June 30
Components of Basic and Diluted Earnings per Share (shares in millions)	2007		2006		2007		2006
Numerator:
Net income	$	112.7	$	150.9	$	262.7	$	207.1
Denominator:
Basic EPS weighted-average shares outstanding		434.85		449.36		437.71		450.05
Diluted effect of assumed conversion of stock-based awards		3.60		2.51		3.38		2.19
Diluted EPS adjusted weighted-average shares outstanding		438.45		451.87		441.09		452.24
Earnings per Share:
Basic EPS	$	.26	$	.34	$	.60	$	.46
Diluted EPS	$	.26	$	.33	$	.60	$	.46

At June 30, 2007 and 2006, we did not include stock options to purchase 8.3 million shares and 14.7 million shares of Avon common stock, respectively, in the calculations of diluted earnings per share because their inclusion would be anti-dilutive.

We purchased approximately 10.8 million shares of Avon common stock for $410.1 during the first six months of 2007, as compared to approximately 4.5 million shares of Avon common stock for $137.9 during the first six months of 2006 under our previously announced share repurchase program and through acquisition of stock from employees in connection with tax payments upon vesting of restricted stock units. During the second quarter of 2007, we purchased approximately 7.3 million shares of our 2007 share repurchases through a purchase agreement entered into in May 2007. At June 30, 2006, purchases of approximately 274,000 shares for $8.3 were not settled until July 2006.

3. INVENTORIES

Components of Inventories	June 30 2007		December 31 2006
Raw materials	$	327.5	$	260.6
Finished goods		703.2		639.7
Total	$	1,030.7	$	900.3

8

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share data)

4. EMPLOYEE BENEFIT PLANS

	Three Months Ended June 30
	Pension Benefits
Net Periodic Benefit Costs	U.S. Plans						Non-U.S. Plans						Postretirement Benefits
	2007			2006			2007			2006			2007			2006
Service cost	$	5.6		$	6.1		$	5.0		$	4.7		$	.8		$	1.0
Interest cost		11.5			11.6			10.3			7.3			2.1			2.8
Assumed return on plan assets		(13.2	)		(13.5	)		(10.8	)		(6.4	)		(.5	)		—
Amortization of prior service cost		(.5	)		(.6	)		(.5	)		.1			(1.5	)		(1.7	)
Amortization of actuarial losses		9.9			8.3			3.5			2.7			.2			.7
Amortization of transition obligation		—			—			.1			—			—			—
Curtailments/ settlements		1.9			3.6			—			2.5			—			(2.1	)
Special termination benefits		—			.2			—			.1			—			3.3
Net periodic benefit costs	$	15.2		$	15.7		$	7.6		$	11.0		$	1.1		$	4.0

	Six Months Ended June 30
	Pension Benefits
Net Periodic Benefit Costs	U.S. Plans						Non-U.S. Plans						Postretirement Benefits
	2007			2006			2007			2006			2007			2006
Service cost	$	12.7		$	14.9		$	10.2		$	9.8		$	1.7		$	1.7
Interest cost		23.7			24.5			21.2			15.3			5.0			5.0
Assumed return on plan assets		(26.8	)		(27.2	)		(22.1	)		(13.4	)		(1.1	)		—
Amortization of prior service cost		(1.0	)		(1.2	)		(1.0	)		.3			(3.1	)		(3.3	)
Amortization of actuarial losses		18.0			18.7			7.0			5.7			.7			1.2
Amortization of transition obligation		—			—			.1			—			—			—
Curtailments/ settlements		1.9			4.7			—			1.7			—			(2.1	)
Special termination benefits		—			3.0			—			2.8			—			3.3
Net periodic benefit costs	$	28.5		$	37.4		$	15.4		$	22.2		$	3.2		$	5.8

We previously disclosed in our financial statements for the year ended December 31, 2006, that we expected to contribute approximately $23 and $70 to our U.S. and non-U.S. pension plans, respectively, in 2007. As of June 30, 2007, we made approximately $7 and $52 of contributions to the U.S. and non-U.S pension plans, respectively. We anticipate contributing approximately $14 and $19 to fund our U.S. and non-U.S. pension plans, during the remainder of 2007. During 2007, we made a decision to fund our U.S. postretirement benefit plan and, as a result, we made a contribution of $50.0 to this plan. Our funding requirements may be impacted by regulations or interpretations thereof relating to the transitioning of our pension plan from a traditional defined benefit plan to a cash balance plan.

5. CONTINGENCIES

We are a defendant in an action commenced in 1975 in the Supreme Court of the State of New York by Sheldon Solow d/b/a Solow Building Company (“Solow”), the landlord of our former headquarters in New York City. Solow alleges that we misappropriated the name of our former headquarters building and seeks damages based on a purported value of one dollar per square foot of leased space per year over the term of the lease. A trial of this action took place in May 2005 and, in January 2006, the judge issued a decision in our favor. Solow appealed that decision to the Appellate Division of the Supreme Court of the State of New York and, in June 2007, the Appellate Division affirmed the trial court’s decision. In July 2007, Solow filed a notice of motion for reargument or, alternatively, for leave to appeal to the Court of Appeals. While it is not possible to predict the outcome of litigation, management believes that there are meritorious defenses to the claims asserted and that this action should not have a material adverse effect on our consolidated financial position, results of operations or cash flows. This action is being vigorously contested.

9

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share data)

Blakemore, et al. v. Avon Products, Inc., et al. is a purported class action pending in the Superior Court of the State of California on behalf of Avon Sales Representatives who “since March 24, 1999, received products from Avon they did not order, thereafter returned the unordered products to Avon, and did not receive credit for those returned products.” The complaint seeks unspecified compensatory and punitive damages, restitution and injunctive relief for alleged unjust enrichment and violation of the California Business and Professions Code. This action was commenced in March 2003. In January 2006, we filed a motion to strike the plaintiffs’ asserted nationwide class. In February 2006, the trial court declined to grant our motion but instead certified the issue to the Court of Appeal on an interlocutory basis. In April 2006, the Court of Appeal denied our motion and instructed the trial court to consider the issue at a subsequent point in the proceedings. We believe that this action is a dispute over purported customer service issues and is an inappropriate subject for consideration as a class action. While it is not possible to predict the outcome of litigation, management believes that there are meritorious defenses to the claims asserted and that this action should not have a material adverse effect on our consolidated financial position, results of operations or cash flows. This action is being vigorously contested.

In December 2002, our Brazilian subsidiary received a series of excise and income tax assessments from the Brazilian tax authorities asserting that the establishment in 1995 of separate manufacturing and distribution companies in that country was done without a valid business purpose. The assessments assert tax deficiencies during portions of the years 1997 and 1998 of approximately $106 at the exchange rate on June 30, 2007, plus penalties and accruing interest totaling approximately $195 at the exchange rate on June 30, 2007. In July 2003, a first-level appellate body rejected the basis for income tax assessments representing approximately 77% of the total assessment, or $233 (including interest). In March 2004, that rejection was confirmed in a mandatory second-level appellate review. The remaining assessments relating to excise taxes (approximately $68) were not affected. In December 2003, an additional assessment was received in respect of excise taxes for the balance of 1998, totaling approximately $138 at the exchange rate on June 30, 2007, and asserting a different theory of liability based on purported market sales data. In January 2005, an unfavorable first administrative level decision was received with respect to the appeal of that assessment and a further appeal has been taken. In December 2004, an additional assessment was received in respect of excise taxes for the period from January 1999 to December 2001, totaling approximately $303 at the exchange rate on June 30, 2007, and asserting the same theory of liability as in the December 2003 assessment. We appealed that assessment. In September 2005, an unfavorable first administrative level decision was received with respect to the appeal of the December 2004 assessment, and a further appeal is being taken. In the event that assessments are upheld in the earlier stages of review, it may be necessary for us to provide security to pursue further appeals, which, depending on the circumstances, may result in a charge to income. It is not possible to make a reasonable estimate of the amount or range of expense that could result from an unfavorable outcome in respect of these or any additional assessments that may be issued for subsequent periods. The structure adopted in 1995 is comparable to that used by many companies in Brazil, and we believe that it is appropriate, both operationally and legally, and that the assessments are unfounded. This matter is being vigorously contested and in the opinion of our outside counsel the likelihood that the assessments ultimately will be upheld is remote. Management believes that the likelihood that the assessments will have a material impact on our consolidated financial position, results of operations or cash flows is correspondingly remote.

Kendall v. Employees’ Retirement Plan of Avon Products and the Retirement Board is a purported class action commenced in April 2003 in the United States District Court for the Southern District of New York. Plaintiff is a retired employee of Avon who, before retirement, had been on paid disability leave for approximately 19 years. The initial complaint alleged that the Employees’ Retirement Plan of Avon Products (the “Retirement Plan”) violated the Employee Retirement Income Security Act (“ERISA”) and, as a consequence, unlawfully reduced the amount of plaintiff’s pension. Plaintiff sought a reformation of the Retirement Plan and recalculation of benefits under the terms of the Retirement Plan, as reformed for plaintiff and for the purported class. In November 2003, plaintiff filed an amended complaint alleging additional Retirement Plan violations of ERISA and seeking, among other things, elimination of a social security offset in the Retirement Plan. The purported class includes “all Plan participants, whether active, inactive or retired, and their beneficiaries and/or Estates, with one hour of service on or after January 1, 1976, whose accrued benefits, pensions or survivor’s benefits have been or will be calculated and paid based on the Plan’s unlawful provisions.” In February 2004, we filed a motion to dismiss the amended complaint, which motion is still pending before the court. While it is not possible to predict the outcome of litigation, management believes that there are meritorious defenses to the claims asserted and that this action should not have a material adverse effect on our consolidated financial position, results of operations or cash flows. This action is being vigorously contested.

10

AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share data)

In August 2005, we reported the filing of class action complaints for alleged violations of the federal securities laws in actions entitled Nilesh Patel v. Avon Products, Inc. et al. and Michael Cascio v. Avon Products, Inc. et al., respectively, which subsequently have been consolidated. A consolidated amended class action complaint for alleged violations of the federal securities laws was filed in the consolidated action in December 2005 in the United States District Court for the Southern District of New York (Master File Number 05-CV-06803) under the caption In re Avon Products, Inc. Securities Litigation naming Avon, an officer and two officer/directors. The consolidated action, brought on behalf of purchasers of our common stock between February 3, 2004 and September 20, 2005, seeks damages for alleged false and misleading statements “concerning Avon’s operations and performance in China, the United States . . . and Mexico.” The consolidated amended complaint also asserts that during the class period certain officers and directors sold shares of our common stock. In February 2006, we filed a motion to dismiss the consolidated amended class action complaint, asserting, among other things, that it failed to state a claim upon which relief may be granted, and the plaintiffs have opposed that motion.

In August 2005, we reported the filing of a complaint in a shareholder derivative action purportedly brought on behalf of Avon entitled Robert L. Garber, derivatively on behalf of Avon Products, Inc. v. Andrea Jung et al. as defendants, and Avon Products, Inc. as nominal defendant. An amended complaint was filed in this action in December 2005 in the United States District Court for the Southern District of New York (Master File Number 05-CV-06803) under the caption In re Avon Products, Inc. Securities Litigation naming certain of our officers and directors. The amended complaint alleges that defendants’ violations of state law, including breaches of fiduciary duties, abuse of control, gross mismanagement, waste of corporate assets and unjust enrichment, between February 2004 and the present, have caused losses to Avon. In February 2006, we filed a motion to dismiss the amended complaint, asserting, among other things, that it failed to state a claim upon which relief may be granted, and the plaintiffs have opposed that motion.

In October 2005, we reported the filing of class action complaints for alleged violations of the Employee Retirement Income Security Act (“ERISA”) in actions entitled John Rogati v. Andrea Jung, et al. and Carolyn Jane Perry v. Andrea Jung, et al., respectively, which subsequently have been consolidated. A consolidated class action complaint for alleged violations of ERISA was filed in the consolidated action in December 2005 in the United States District Court for the Southern District of New York (Master File Number 05-CV-06803) under the caption In re Avon Products, Inc. ERISA Litigation naming Avon, certain officers, Avon’s Retirement Board and others. The consolidated action purports to be brought on behalf of the Avon Products, Inc. Personal Savings Account Plan and the Avon Products, Inc. Personal Retirement Account Plan (collectively the “Plan”) and on behalf of participants and beneficiaries of the Plan “for whose individual accounts the Plan purchased or held an interest in Avon Products, Inc. . . . common stock from February 20, 2004 to the present.” The consolidated complaint asserts breaches of fiduciary duties and prohibited transactions in violation of ERISA arising out of, inter alia, alleged false and misleading public statements regarding Avon’s business made during the class period and investments in Avon stock by the Plan and Plan participants. In February 2006, we filed a motion to dismiss the consolidated complaint, asserting that it failed to state a claim upon which relief may be granted, and the plaintiffs have opposed that motion.

It is not possible to predict the outcome of litigation and it is reasonably possible that there could be unfavorable outcomes in the In re Avon Products, Inc. Securities Litigation, In re Avon Products, Inc. Securities Litigation (derivative action) and In re Avon Products, Inc. ERISA Litigation matters. Management is unable to make a meaningful estimate of the amount or range of loss that could result from unfavorable outcomes but, under some circumstances, adverse awards could be material to our consolidated financial position, results of operations or cash flows.

Various other lawsuits and claims, arising in the ordinary course of business or related to businesses previously sold, are pending or threatened against Avon. In management’s opinion, based on its review of the information available at this time, the total cost of resolving such other contingencies at June 30, 2007, should not have a material adverse effect on our consolidated financial position, results of operations or cash flows.

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AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share data)

6. COMPREHENSIVE INCOME

	Three Months Ended June 30						Six Months Ended June 30
Components of Comprehensive Income	2007			2006			2007			2006
Net income	$	112.7		$	150.9		$	262.7		$	207.1
Foreign currency translation adjustments		54.6			(7.7	)		69.2			(10.6	)
Change in unrealized gains from available-for-sale securities		—			(.1	)		—			(.2	)
Change in derivative losses on cash flow hedges		(1.8	)		(.7	)		(2.3	)		(1.7	)
Adjustment for amortization of net actuarial loss, prior service cost, and transition obligation, net of taxes		7.2			—			13.4			—
Comprehensive income	$	172.7		$	142.4		$	343.0		$	194.6

We received final January 1, 2007 valuations for our U.S. pension and postretirement plans during the second quarter of 2007 and, as a result, recorded an after-tax actuarial loss of $8.0 for our pension plan and an after-tax actuarial gain of $5.9 for our postretirement plan to accumulated other comprehensive loss.

7. SEGMENT INFORMATION

Summarized financial information concerning our reportable segments was as follows:

	Three Months Ended June 30
	2007					2006
	Revenue		Operating Profit (Loss)			Revenue		Operating Profit (Loss)
North America	$	619.8	$	41.5		$	620.1	$	60.8
Latin America		798.1		113.7			653.1		96.6
Western Europe, Middle East & Africa		310.0		15.2			273.5		25.8
Central & Eastern Europe		332.9		45.9			288.6		71.1
Asia Pacific		203.0		16.2			196.3		12.1
China		65.0		(2.0	)		47.9		(4.3	)
Total from operations		2,328.8		230.5			2,079.5		262.1
Global and other		—		(43.6	)		—		(36.8	)
Total	$	2,328.8	$	186.9		$	2,079.5	$	225.3

	Six Months Ended June 30
	2007					2006
	Revenue		Operating Profit (Loss)			Revenue		Operating Profit (Loss)
North America	$	1,250.4	$	118.7		$	1,233.9	$	98.8
Latin America		1,454.4		202.4			1,265.7		165.6
Western Europe, Middle East & Africa		581.6		28.9			506.5		(8.3	)
Central & Eastern Europe		691.8		123.3			594.6		132.8
Asia Pacific		402.8		37.1			386.7		10.0
China		133.1		.9			95.3		(4.9	)
Total from operations		4,514.1		511.3			4,082.7		394.0
Global and other		—		(86.6	)		—		(82.5	)
Total	$	4,514.1	$	424.7		$	4,082.7	$	311.5

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AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share data)

Our consolidated net sales by classes of principal products were as follows:

	Three Months Ended June 30				Six Months Ended June 30
	2007		2006		2007		2006
Beauty(1)	$	1,647.8	$	1,448.8	$	3,175.8	$	2,834.1
Beauty Plus(2)		450.0		416.0		877.5		814.5
Beyond Beauty(3)		208.6		194.1		416.4		392.7
Net sales		2,306.4		2,058.9		4,469.7		4,041.3
Other revenue(4)		22.4		20.6		44.4		41.4
Total revenue	$	2,328.8	$	2,079.5	$	4,514.1	$	4,082.7

⁽¹⁾ Beauty includes cosmetics, fragrances, skin care and toiletries.

⁽²⁾ Beauty Plus includes fashion jewelry, watches, apparel and accessories.

⁽³⁾ Beyond Beauty includes home products and gift and decorative products.

⁽⁴⁾ Other primarily includes shipping and handling fees billed to Representatives.

Sales from Health and Wellness products and mark. are included among these categories based on product type.

8. SUPPLEMENTAL INCOME STATEMENT INFORMATION

	Three Months Ended June 30						Six Months Ended June 30
Components of Other Expense, net	2007			2006			2007			2006
Foreign exchange (gains) losses, net	$	(.2	)	$	.1		$	(1.3	)	$	(.4	)
Amortization of debt issue costs and other financing		2.7			2.1			5.0			4.4
Other		(1.3	)		(1.4	)		(1.9	)		(1.6	)
Other expense, net	$	1.2		$	.8		$	1.8		$	2.4

9. RESTRUCTURING INITIATIVES

In November 2005, we announced a multi-year turnaround plan as part of a major drive to fuel revenue growth and expand profit margins, while increasing consumer investments. As part of our turnaround plan, restructuring initiatives include:

• enhancement of organizational effectiveness, including efforts to flatten the organization and bring senior management closer to consumers through a substantial organization downsizing;

• implementation of a global manufacturing strategy through facilities realignment;

• additional supply chain efficiencies in distribution; and

• streamlining of transactional and other services through outsourcing and moves to low-cost countries.

We expect to incur restructuring charges and other costs to implement these initiatives in the range of $500 before taxes. To date, we have incurred total costs to implement, net of adjustments, of $315.5 ($30.2 in the first six months of 2007, $228.8 in 2006 and $56.5 in 2005) for actions associated with our restructuring initiatives. We expect to incur significant additional charges over the next few years.

Restructuring Charges – First and Second Quarters 2007

During the first quarter of 2007, we did not approve any exit or disposal activities that are part of our multi-year restructuring plan. In the second quarter of 2007, exit and disposal activities that are a part of our multi-year restructuring plan were approved. Specific actions for this phase of our multi-year restructuring plan included:

• the reorganization of certain functions;

13

• automation of certain distribution processes; and

• outsourcing of finance and customer service processes.

The actions described above are expected to be completed by the end of 2008.

In connection with initiatives that have been approved to date, we recorded total costs to implement for the three and six months ended June 30, 2007 of $20.5 and $30.2, respectively, and the costs consisted of the following:

• charges of $11.4 and $12.3, respectively, primarily for employee-related costs, including severance, pension and other termination benefits;

• favorable adjustments of $2.2 and $3.0, respectively, primarily relating to certain employees pursuing reassignments to other positions and higher than expected turnover (employees leaving prior to termination);

• implementation costs of $10.1 and $16.7, respectively, for professional service fees, primarily associated with our initiatives to outsource certain human resource, finance and customer service processes; and

• accelerated depreciation of $1.2 and $4.2, respectively, associated with our initiatives to realign certain distribution operations, realign our organization through delayering, and close certain manufacturing operations.

Of the total costs to implement, $20.5 and $29.5 was recorded in selling, general and administrative expenses for the three and six months ended June 30, 2007, respectively, and $.7 was recorded in cost of sales for the six months ended June 30, 2007.

Restructuring Charges – First and Second Quarters 2006

In first and second quarters of 2006, exit and disposal activities that are a part of our multi-year restructuring plan were approved. Specific actions for this phase of our multi-year restructuring plan included:

• organization realignment and downsizing in each region and global through a process called “delayering,” taking out layers to bring senior management closer to operations;

• the phased outsourcing of certain services in North America and the realignment of certain manufacturing processes; and

• the exit of certain unprofitable operations.

The actions described above were completed during 2006, except for the outsourcing of certain services in North America, which is expected to be completed in phases through 2008.

In connection with initiatives that had been approved to date, we recorded total costs to implement for the three and six months ended June 30, 2006 of $49.4 and $169.5, respectively, and the costs consisted of the following:

• charges of $47.9 and $156.3, respectively, primarily for employee-related costs, including severance, pension and other termination benefits;

• favorable adjustments of $7.4 and $7.9, respectively, primarily relating to certain employees pursuing reassignments to other positions and higher than expected turnover (employees leaving prior to termination); and

• other costs to implement of $8.9 and $21.1, respectively, related to the implementation of these initiatives.

Of the total costs to implement, $49.2 and $169.8 was recorded in selling, general and administrative expenses for the three and six months ended June 30, 2006, respectively, and $.2 and a favorable adjustment of $.3 was recorded in cost of sales for the three and six months ended June 30, 2006, respectively.

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AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share data)

The liability balances for the initiatives that have been approved to date are shown below.

	Employee- Related Costs			Asset Write-offs			Inventory Write-offs		Currency Translation Adjustment Write-offs		Contract Terminations/ Other			Total
Balance December 31, 2006	$	84.9		$	—		$	—	$	—	$	1.1		$	86.0
2007 Charges		12.0			.2			—		—		.1			12.3
Adjustments		(3.0	)		—			—		—		—			(3.0	)
Cash payments		(30.4	)		—			—		—		(1.0	)		(31.4	)
Non-cash write-offs		(1.9	)		(.2	)		—		—		(.1	)		(2.2	)
Foreign exchange		.6			—			—		—		—			.6
Balance June 30, 2007	$	62.2		$	—		$	—	$	—	$	.1		$	62.3

The following table presents the restructuring charges incurred to date, net of adjustments, under our multi-year restructuring plan that began in the fourth quarter of 2005, along with the charges expected to be incurred for the initiatives approved to date:

	Employee- Related Costs		Asset Write- offs		Inventory Write- offs		Currency Translation Adjustment Write-offs		Contract Terminations/ Other		Total
Charges incurred to date	$	227.1	$	10.8	$	7.4	$	11.6	$	6.2	$	263.1
Charges to be incurred on approved initiatives		7.1		—		—		—		.1		7.2
Total expected charges	$	234.2	$	10.8	$	7.4	$	11.6	$	6.3	$	270.3

The charges, net of adjustments, of initiatives approved to date by reportable business segment were as follows:

	North America			Latin America		Western Europe, Middle East & Africa		Central & Eastern Europe			Asia Pacific		China			Corporate		Total
2005	$	6.9		$	3.5	$	11.7	$	1.0		$	18.2	$	4.2		$	6.1	$	51.6
2006		61.8			34.6		45.1		6.9			22.2		2.1			29.5		202.2
First Quarter 2007		(.3	)		.1		.2		.1			—		(.1	)		.1		.1
Second Quarter 2007		3.2			.3		4.4		(.2	)		.4		.3			.8		9.2
Charges recorded to date	$	71.6		$	38.5	$	61.4	$	7.8		$	40.8	$	6.5		$	36.5	$	263.1
Charges to be incurred on approved initiatives		5.2			.4		1.0		—			—		.2			.4		7.2
Total expected charges	$	76.8		$	38.9	$	62.4	$	7.8		$	40.8	$	6.7		$	36.9	$	270.3

As noted previously, we expect to incur total costs to implement in the range of $500 before taxes for all restructuring initiatives, including restructuring charges and other costs to implement. The amounts shown in the tables above as charges recorded to date relate to initiatives that have been approved and recorded in the financial statements as the costs are probable and estimable. The amounts shown in the tables above as total expected charges represent charges recorded to date plus charges yet to be recorded for approved initiatives as the relevant accounting criteria for recording have not yet been met. In addition to the charges included in the tables above, we will incur other costs to implement such as consulting, other professional services and accelerated depreciation.

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AVON PRODUCTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in millions, except per share data)

10. GOODWILL AND INTANGIBLE ASSETS

On April 2, 2007, we acquired our licensee in Egypt for approximately $17 in cash. The acquired business is being operated by a new wholly-owned subsidiary and is included in our Western Europe, Middle East & Africa operating segment. We have performed a preliminary purchase price allocation which has been recorded as of the acquisition date. We are in the process of gathering sufficient data to support certain assumptions for the final valuation; therefore, the allocation of the purchase price is subject to adjustment.

Goodwill

	Latin America			Western Europe, Middle East & Africa		Central & Eastern Europe		Asia Pacific			China		Total
Balance at December 31, 2006	$	95.1		$	24.2	$	8.8	$	10.2		$	65.4	$	203.7
Goodwill acquired during the year		—			6.4		—		—			—		6.4
Adjustments		—			—		—		—			.2		.2
Foreign exchange		(.2	)		1.2		—		(.3	)		1.8		2.5
Balance at June 30, 2007	$	94.9		$	31.8	$	8.8	$	9.9		$	67.4	$	212.8

Intangible assets

	June 30, 2007					December 31, 2006
	Carrying Amount		Accumulated Amortization			Carrying Amount		Accumulated Amortization
Amortized Intangible Assets
Customer relationships	$	37.7	$	(14.8	)	$	36.3	$	(12.0	)
Licensing agreements		38.1		(15.5	)		36.0		(11.1	)
Noncompete agreements		8.3		(4.6	)		8.1		(3.8	)
Total	$	84.1	$	(34.9	)	$	80.4	$	(26.9	)

Estimated Amortization Expense:
2007	$	16.8
2008		16.6
2009		14.3
2010		2.2
2011		1.6

Aggregate amortization expense during the three and six months ended June 30, 2007 was $4.3 and $8.4, respectively, compared to $4.4 and $11.8, respectively, for the same periods of 2006.

11. DEBT

In April 2007, we entered into a one-year Euro 50 million ($67.2 at the exchange rate on June 30, 2007) uncommitted credit facility (“Euro credit facility”) with the Bank of Tokyo-Mitsubishi UFJ, Ltd. Borrowings under the Euro credit facility bear interest at the Euro LIBOR rate plus an applicable margin. The Euro credit facility is available for general corporate purposes. The Euro credit facility is designated as a hedge of our investments in our Euro-denominated functional currency subsidiaries. At June 30, 2007, there were no amounts outstanding under the Euro credit facility.

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AVON PRODUCTS, INC.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in millions, except per share data)

OVERVIEW

We are a global manufacturer and marketer of beauty and related products. Our business is conducted worldwide, primarily in the direct selling channel. We presently have sales operations in approximately 65 countries and territories, including the United States, and distribute products in approximately 50 more. Our reportable segments are based on geographic operations in six regions: North America; Latin America; Western Europe, Middle East & Africa; Central & Eastern Europe; Asia Pacific; and China. We centrally manage global Brand Marketing and Supply Chain organizations. Product categories include: Beauty, which consists of cosmetics, fragrances, skin care and toiletries; Beauty Plus, which consists of fashion jewelry, watches, apparel and accessories; and Beyond Beauty, which consists of home products and gift and decorative products. Sales from Health and Wellness products and mark., a global cosmetics brand that focuses on the market for young women, are included among these categories based on product type. Sales are made to the ultimate consumer principally through approximately 5.3 million independent Representatives, who are independent contractors and not employees of Avon. The success of our business is highly dependent on recruiting, motivating and retaining Representatives.

We view the geographic diversity of our businesses as a strategic advantage. In developed markets, such as the United States, we seek to achieve growth in line with that of the overall beauty market, while in developing and emerging markets we have higher growth targets.

Revenue grew in every segment other than North America during the three and six months ended June 30, 2007. Revenue in North America was flat in the second quarter and increased slightly in the six months ended June 30, 2007. We continued to experience strong growth in emerging and developing markets, including Brazil, China, Colombia, Russia, Turkey and Venezuela. Revenue in China increased significantly in both the three and six months ended June 30, 2007, due to the continued roll-out of direct selling. Revenue in Mexico increased during the second quarter of 2007 for the first time in several quarters. See the “Segment Review” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information related to changes in revenue by segment.

As part of our turnaround plan, in the three and six months ended June 30, 2007 we invested ahead of savings and incurred incremental costs, including investments in advertising and the Representative Value Proposition (“RVP”), as well as continued costs of restructuring and our product line simplification program (“PLS”). Our operating margin during 2007 has been and is expected to continue to be impacted by these costs associated with our turnaround plan. While full year operating margin should expand in 2007 from 2006’s level of 8.7%, it is expected to be close to 2005’s level of 14.1% in 2008. As the savings and benefits from restructuring, PLS and our strategic sourcing initiative (“SSI”) begin to exceed the incremental levels of investments in advertising and RVP, operating margin is then expected to further expand beginning in 2009.

As we move through our turnaround plan, continuing to drive revenue growth remains one of our key priorities.

Strategic Initiatives

In November 2005, we launched a comprehensive, multi-year turnaround plan to restore sustainable growth. Our four-point turnaround plan includes:

• Committing to brand competitiveness by focusing research and development resources on product innovation and by increasing our advertising;

• Winning with commercial edge by more effectively utilizing pricing and promotion, expanding our Sales Leadership program and improving the attractiveness of our Representative earnings opportunity as needed;

• Elevating organizational effectiveness by redesigning our structure to eliminate layers of management in order to take full advantage of our global scale and size; and

• Transforming the cost structure so that our costs are aligned to our revenue growth and remain so.

Our turnaround plan gained traction and continued to deliver results. For the three and six months ended June 30, 2007, revenues increased 12% and 11%, respectively, Active Representatives increased 9% and 7%, respectively, and sales from products in the Beauty category increased 14% and 12%, respectively, benefiting from higher investments in advertising and RVP. These investments were partially funded by savings from restructuring initiatives and other cost savings initiatives. Our turnaround plan is a multi-year effort and we may see some quarterly variability as we move through the turnaround.

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AVON PRODUCTS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in millions, except per share data)

In our ongoing effort to improve brand competitiveness, for the three and six months ended June 30, 2007, we increased our investment in advertising by 74% and 77%, respectively, from $53.5 and $93.2 for the three and six months ended June 30, 2006, respectively, to $93.3 and $164.6 for the three and six months ended June 30, 2007, respectively. The incremental spending on advertising for the first half of 2007 was allocated across all geographies, with more than 50% of the increase in China, Brazil, Russia and the U.S. The advertising investments supported new product launches, such as Avon Color cosmetics, including Ultra Color Rich Lipstick, and Anew Retroactive, as well as continued support for “Hello Tomorrow,” Avon’s first global, integrated marketing campaign, supporting both the brand and direct selling channel. Advertising investments also included advertising to recruit Representatives. The roll-out of our new Avon Color brand continued in the second quarter. We targeted a 35% increase in our spending on advertising in 2007, and now we expect a 50% increase in our spending on advertising in 2007 from approximately $250 in 2006.

As part of the Representative Value Proposition, we also continued to invest in our direct selling channel to improve the reward and effort equation for our Representatives. We measure our investment in RVP as the incremental cost to provide these value-enhancing initiatives. In the first six months of 2007, we invested approximately $45 incrementally to enhance RVP through continued implementation of our Sales Leadership program, increased incentives spending and web-enablement. During 2007, we expect to make over $100.0 of investments in RVP incremental to 2006. Investing in RVP will continue to be a key strategy.

We continue to analyze our product line under our product line simplification program, which includes an analysis of our product line to develop a smaller range of better performing, more profitable products. This program is designed to improve the shopping experience, our brand image and Representative experiences by reducing the number of SKUs overall, which is expected to yield significant benefits. We incurred costs of $60.9 and $78.2 related to our PLS program for the three and six months ended June 30, 2007, primarily incremental inventory obsolescence expense of $55.9 and $67.4. We have incurred total PLS costs of $159.6 ($78.2 in 2007 and $81.4 in 2006). Depending on the results of additional PLS analyses that will be performed to identify the optimal product assortment over the next three years and timing of any resulting decisions, we may incur future costs related to PLS, principally in the form of inventory obsolescence expense. We expect that the costs incurred from the beginning of 2007 through to full implementation will now exceed the $100 previously disclosed in our 2006 Annual Report on Form 10-K due to deeper inventory reductions than originally anticipated. We expect to realize benefits from PLS beginning in the second half of 2008 and building in 2009. We expect to realize full annualized benefits in excess of $200 by the end of 2009. Annualized benefits or annualized savings have been defined as amounts expected to be realized on a full-year basis every year following completion of the initiatives.

In March 2007, we launched the first phase of our strategic sourcing initiative. This initiative is expected to reduce direct and indirect costs of materials, goods and services. Under this initiative, we will shift our purchasing strategy toward a global supplier orientation from one that is more local and component oriented. Beyond lower costs, goals include improving asset management, service for Representatives and vendor relationships. We expect to realize initial benefits from SSI beginning in the third quarter of 2007, with annualized benefits from this initiative in excess of $200 by the end of 2009. We also continued the implementation of a Sales & Operations Planning initiative that is intended to better align demand plans with our supply capabilities and provide us with earlier visibility to any potential supply issues.

We are institutionalizing a zero-overhead-growth philosophy (“ZOG”) that aims to offset inflation through productivity improvements. These improvements in productivity will come primarily from previously announced initiatives such as our restructuring program, PLS and SSI. We have defined overhead as fixed expenses such as costs associated with our sales and marketing infrastructure, and management and administrative activities. Overhead excludes variable expenses such as shipping and handling costs and bonuses to our employees in the sales organization. Excluding the impact of foreign exchange, overhead expenses decreased during the first six months of 2007 as compared to the first six months of 2006.

Restructuring Initiatives

In connection with our four-point turnaround plan, in November 2005, we announced a multi-year restructuring plan. We expect to incur total restructuring charges and other costs to implement our restructuring initiatives in the range of $500 before taxes. We have incurred total costs to implement, net of adjustments, of $315.5 ($30.2 in the first six months of 2007, $228.8 in 2006 and $56.5 in 2005) for actions associated with our restructuring initiatives under the plan, primarily for employee-related costs, including severance, pension and other termination benefits and professional service fees related to these initiatives. We expect to incur significant additional charges over the next few years. We expect our restructuring initiatives to deliver in excess of $300.0 of annualized savings when fully realized. The actions implemented to date resulted in savings of approximately $58 and $115 in the three and six months ending June 30, 2007, respectively, most of which were associated with the delayering program that we completed in 2006. We expect that the actions announced to date will result in savings in the range of $230 in 2007.

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AVON PRODUCTS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in millions, except per share data)

See Note 9, Restructuring Initiatives, for additional information.

New Accounting Pronouncements

Effective January 1, 2007, we adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109, (“FIN 48”). As a result of the implementation of FIN 48, we recognized an $18.3 increase in the liability for unrecognized tax benefits (including interest and penalties), which was accounted for as a reduction to the January 1, 2007 balance of retained earnings.

In February 2007, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment to FASB Statement No. 115, (“SFAS 159”), which permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS 159 is effective January 1, 2008, for Avon. We do not believe the adoption of SFAS 159 will have a material impact on our consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 is effective January 1, 2008, for Avon. We do not believe the adoption of SFAS 157 will have a material impact on our consolidated financial statements.

See Note 1, Accounting Policies, for additional information.

RESULTS OF OPERATIONS—THREE AND SIX MONTHS ENDED JUNE 30, 2007 AS COMPARED TO 2006

Consolidated

	Three Months Ended June 30, 2007								Six Months Ended June 30, 2007
	2007			2006			Favorable (Unfavorable) %/Point Change		2007			2006			Favorable (Unfavorable) %/Point Change
Total revenue	$	2,328.8		$	2,079.5		12	%	$	4,514.1		$	4,082.7		11	%
Cost of sales		925.0			776.5		(19	)%		1,761.7			1,556.2		(13	)%
Selling, general and administrative expenses		1,216.9			1,077.7		(13	)%		2,327.7			2,215.0		(5	)%
Advertising expenses*		93.3			53.5		(74	)%		164.6			93.2		(77	)%
Operating profit		186.9			225.3		(17	)%		424.7			311.5		36	%
Interest expense		28.1			23.9		(18	)%		54.6			50.4		(8	)%
Interest income		10.3			16.7		(38	)%		22.6			29.9		(24	)%
Other expense, net		1.2			.8		(50	)%		1.8			2.4		25	%
Net income		112.7			150.9		(25	)%		262.7			207.1		27	%
Diluted earnings per share		.26			.33		(21	)%		.60			.46		30	%
Gross margin		60.3	%		62.6	%	(2.3	)		61.0	%		61.9	%	(.9	)
Selling, general and administrative expenses as a % of total revenue		52.3	%		51.8	%	(.5	)		51.6	%		54.3	%	2.7
Operating margin		8.0	%		10.8	%	(2.8	)		9.4	%		7.6	%	1.8
Effective tax rate		32.3	%		30.7	%	(1.6	)		32.4	%		28.1	%	(4.3	)
Units sold							7	%							5	%
Active Representatives							9	%							7	%

* Advertising expenses are included within selling, general and administrative expenses.

19

AVON PRODUCTS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in millions, except per share data)

Revenue

Total revenue for the second quarter of 2007 increased 12%, with growth in all segments other than North America. Revenue in North America was flat with the second quarter of 2006. Revenue growth was driven by an increase of 9% in Active Representatives. Foreign exchange contributed 5 percentage points to the revenue growth.

On a category basis, the increase in revenue for the second quarter of 2007 was primarily driven by an increase of 14% in Beauty sales, with increases in all sub-categories of Beauty. Within the Beauty category, fragrance grew 21%, personal care grew 19%, color grew 16%, and skin care grew 4%. Beauty Plus sales increased 8% and Beyond Beauty sales increased 7%.

Total revenue for the six months ended June 30, 2007, increased 11%, with growth in all segments. Revenue growth was driven by an increase of 7% in Active Representatives. Foreign exchange contributed 4 percentage points to the revenue growth.

On a category basis, the increase in revenue for the six months ended June 30, 2007, was primarily driven by an increase of 12% in Beauty sales, with increases in all sub-categories of Beauty. Within the Beauty category, skin care grew 5%, fragrance grew 17%, personal care grew 18%, and color grew 12%. Beauty Plus sales increased 8% and Beyond Beauty sales increased 6%.

See the “Segment Review” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information related to changes in revenue by segment.

Gross Margin

Gross margin for the second quarter of 2007, decreased 2.3 points, primarily due to an increase in inventory obsolescence provisions of approximately $63 in 2007, which includes incremental inventory obsolescence charges of $55.9 related to our decision to discontinue the sale of certain products as part of our PLS program, and an unfavorable mix of products sold, partially offset by supply chain efficiencies.

Gross margin for the six months ended June 30, 2007, decreased .9 point, primarily due to an increase in inventory obsolescence provisions of approximately $53 in 2007 and an unfavorable mix of products sold, partially offset by supply chain efficiencies. The six months ended June 30, 2007, included incremental inventory obsolescence charges of $67.4 related to our decision to discontinue the sale of certain products as part of our PLS program, while the six months ended June 30, 2006, included incremental inventory obsolescence charges of $20.5 related to our decision to discontinue the sale of certain heavily discounted products.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the second quarter of 2007 increased $139.2, primarily due to higher spending on advertising and RVP and higher variable expenses such as freight and commission from increased sales volume. Partially offsetting the higher expenses was $28.7 of lower costs incurred to implement our restructuring initiatives and savings associated with restructuring initiatives, primarily due to position eliminations.

Selling, general and administrative expenses for the six months ended June 30, 2007 increased $112.7, primarily due to higher spending on advertising and RVP and higher variable expenses such as freight and commission from increased sales volume. Partially offsetting the higher expenses was $140.3 of lower costs incurred to implement our restructuring initiatives and savings associated with restructuring initiatives, primarily due to position eliminations.

See the “Segment Review” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information related to changes in operating margin by segment.

20

AVON PRODUCTS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in millions, except per share data)

Other Expense

Interest expense increased for both the three and six months ended June 30, 2007, primarily due to higher interest rates, as well as higher debt levels associated with our share repurchase program. At June 30, 2007, we held interest rate swap agreements that effectively converted approximately 30% of our outstanding long-term, fixed-rate borrowings to a variable interest rate based on LIBOR.

Interest income decreased for both the three and six months ended June 30, 2007, primarily due to lower cash and cash equivalent balances during 2007 as compared to the same period in 2006.

Effective Tax Rate

The effective tax rate for the three and six months ended June 30, 2007, was 32.3% and 32.4%, respectively, compared to rates of 30.7% and 28.1%, respectively, for the same periods of 2006. The effective tax rates for three and six months ended June 30, 2007 were higher than the rates for the same periods of 2006 primarily due to a 2006 tax refund and changes in the earnings mix and tax rates of international subsidiaries in 2007, partially offset by the 2006 tax impact from the repatriation of international earnings. Additionally, the effective tax rate in the six months ended June 30, 2007 was higher than the rate for the six months ended June 30, 2006 due to audit settlements in 2006.

Segment Review

North America

	Three Months Ended June 30										Six Months Ended June 30
							%/Point Change										%/Point Change
	2007			2006			US$		Local Currency		2007			2006			US$		Local Currency
Revenue	$	619.8		$	620.1		—	%	—	%	$	1,250.4		$	1,233.9		1	%	1	%
Operating profit		41.5			60.8		(32	)%	(32	)%		118.7			98.8		20	%	20	%
Operating margin		6.7	%		9.8	%	(3.1	)	(3.2	)		9.5	%		8.0	%	1.5		1.5
Units sold									—	%									3	%
Active Representatives									4	%									2	%

The dominant contributor to North America’s results is the U.S. business.

Total revenue was flat for the second quarter of 2007 as growth in Active Representatives of 4%, the largest increase in many years, was offset by a decline in average order reflecting an unfavorable mix of products sold due in part to strong product innovation in the skin care category in 2006. During 2007, key skin care innovations are planned for the second half of the year. Revenue increased for the six months ended June 30, 2007, reflecting growth in Active Representatives. Active Representatives grew in both periods of 2007, as continued investments in RVP and investments in recruiting advertising more than offset the negative impact from higher fuel prices. The U.S. business is in the midst of a long-term turnaround plan and we expect some variability in our quarterly performance. Quarterly performance has been and may continue to be impacted by various factors, including the impact of fuel prices on Active Representatives’ ordering activity and timing of product launches. We expect that revenue growth in North America for the third quarter of 2007 should be more consistent with Active Representative growth benefiting from field momentum, stronger product launches and continued investments in advertising.

The decrease in operating margin for the second quarter of 2007 was primarily due to higher inventory obsolescence expense, higher spending on advertising and RVP and costs related to the implementation of an enterprise resource planning system. These higher costs were partially offset by lower costs to implement restructuring initiatives, which positively impacted operating margin by .8 point, savings associated with restructuring initiatives, primarily due to position eliminations, and supply chain efficiencies.

The increase in operating margin for the six months ended June 30, 2007, was primarily driven by lower costs to implement restructuring initiatives, which positively impacted operating margin by 2.4 points, savings associated with restructuring initiatives, primarily due to position eliminations, and supply chain efficiencies. These benefits to operating margin were partially offset by higher inventory obsolescence expense, higher spending on advertising and RVP and costs related to the implementation of an enterprise resource planning system.

21

AVON PRODUCTS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in millions, except per share data)

Latin America

	Three Months Ended June 30										Six Months Ended June 30
							%/Point Change										%/Point Change
	2007			2006			US$		Local Currency		2007			2006			US$		Local Currency
Revenue	$	798.1		$	653.1		22	%	15	%	$	1,454.4		$	1,265.7		15	%	11	%
Operating profit		113.7			96.6		18	%	8	%		202.4			165.6		22	%	16	%
Operating margin		14.2	%		14.8	%	(.6	)	(1.0	)		13.9	%		13.1	%	.8		.6
Units sold									12	%									7	%
Active Representatives									9	%									5	%

Total revenue increased for both periods of 2007, driven by a larger average order and growth in Active Representatives, reflecting significant investments in advertising and RVP, as well as favorable foreign exchange. Revenue for the second quarter of 2007, benefited from growth in all markets, particularly from growth of over 30% in each of Brazil, Colombia and Venezuela. Revenue for the six months ended June 30, 2007 benefited from growth in most markets, particularly from growth of over 20% in each of Brazil, Venezuela and Colombia.

Revenue growth in Brazil for both periods of 2007 was driven by increases in both Active Representatives and average order, primarily due to significant investments in advertising and RVP, including the launch of “Hello Tomorrow,” as well as favorable foreign exchange. Revenue in Mexico increased 3% in the second quarter of 2007, after several quarters of declines. The revenue increase in Mexico was primarily due to an increase in Active Representatives, reflecting strengthened training and incentives and retraining of our zone managers in field fundamentals. Revenue in Mexico declined for the six months ended June 30, 2007. While we have seen improvement in our business in Mexico during the second quarter of 2007, this business is in the midst of a long-term turnaround plan and we expect some variability in our quarterly performance.

The decrease in operating margin for the second quarter of 2007 was primarily due to higher spending on advertising and RVP, an unfavorable mix of products sold and higher inventory obsolescence expense. These higher costs were partially offset by lower costs to implement restructuring initiatives, which positively impacted operating margin by 2.9 points, and savings associated with restructuring initiatives, primarily due to position eliminations, and the impact of higher revenue.

The increase in operating margin for the six months ended June 30, 2007 was primarily driven by lower costs to implement restructuring initiatives, which positively impacted operating margin by 2.6 points. Additionally, the impact of higher revenue and savings associated with restructuring initiatives, primarily due to position eliminations, were partially offset by increased spending on advertising and RVP and higher inventory obsolescence expense.

Currency restrictions enacted by the Venezuelan government in 2003 have become more restrictive and have further impacted the ability of our subsidiary in Venezuela (“Avon Venezuela”) to obtain foreign currency at the official rate to pay for imported products. Unless official foreign exchange is made more readily available, Avon Venezuela’s operations will continue to be negatively impacted as it will need to obtain more of its foreign currency needs from non-government sources where the exchange rate is weaker than the official rate.

At June 30, 2007, Avon Venezuela had cash balances of approximately $113, primarily denominated in bolivars. During 2006, Avon Venezuela remitted dividends at the official exchange rate. Avon Venezuela continues to receive official foreign exchange for some of its imports and other remittances. As a result, we continue to use the official rate to translate the financial statements of Avon Venezuela into U.S. dollars. In 2006, Avon Venezuela’s revenue and operating profit represented approximately 3% and 7% of consolidated revenue and consolidated operating profit, respectively.

22

AVON PRODUCTS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in millions, except per share data)

Western Europe, Middle East & Africa

	Three Months Ended June 30										Six Months Ended June 30
							%/Point Change										%/Point Change
	2007			2006			US$		Local Currency		2007			2006			US$		Local Currency
Revenue	$	310.0		$	273.5		13	%	5	%	$	581.6		$	506.5		15	%	7	%
Operating profit		15.2			25.8		(41	)%	(57	)%		28.9			(8.3	)	*		*
Operating margin		4.9	%		9.5	%	(4.6	)	(5.5	)		5.0	%		(1.6	)	6.6		6.2
Units sold									1	%									6	%
Active Representatives									8	%									8	%

* Calculation not meaningful

Total revenue increased for both periods of 2007, reflecting growth in Active Representatives, as well as favorable foreign exchange. The revenue increase for both periods of 2007 was primarily driven by growth in Turkey and the United Kingdom. Revenue growth in Turkey of over 30% in both periods of 2007 was primarily due to significant growth in Active Representatives. Revenue growth in the United Kingdom of nearly 10% and mid-teens in the three and six months ended June 30, 2007, respectively, benefited from favorable foreign exchange and growth in Active Representatives, mainly due to the strength of the Sales Leadership program. Revenue in Turkey and the United Kingdom benefited in both periods from significant investments in advertising and RVP.

The decrease in operating margin for the second quarter of 2007 was primarily due to higher inventory obsolescence expense, higher spending on advertising and RVP and higher costs to implement restructuring initiatives, which negatively impacted operating margin by 1.2 points. These higher costs were partially offset by lower product costs due to favorable foreign exchange movements and savings associated with restructuring initiatives, primarily due to position eliminations.

The increase in operating margin for the six months ended June 30, 2007, was primarily driven by lower costs to implement restructuring initiatives, which positively impacted operating margin by 5.3 points. Other contributing items include lower product costs due to favorable foreign exchange movements and savings associated with restructuring initiatives, primarily due to position eliminations, partially offset by higher spending on advertising and higher inventory obsolescence expense.

23

AVON PRODUCTS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in millions, except per share data)

Central & Eastern Europe

	Three Months Ended June 30										Six Months Ended June 30
							%/Point Change										%/Point Change
	2007			2006			US$		Local Currency		2007			2006			US$		Local Currency
Revenue	$	332.9		$	288.6		15	%	6	%	$	691.8		$	594.6		16	%	8	%
Operating profit		45.9			71.1		(35	)%	(45	)%		123.3			132.8		(7	)%	(17	)%
Operating margin		13.8	%		24.6	%	(10.8	)	(11.9	)		17.8	%		22.3	%	(4.5	)	(5.2	)
Units sold									6	%									3	%
Active Representatives									8	%									8	%

Total revenue increased for both periods of 2007, reflecting growth in Active Representatives, as well as favorable foreign exchange. The region’s revenue growth in both periods of 2007 was primarily driven by Russia. Revenue in Russia increased in the mid-teens for the three months ended June 30, 2007 and increased over 20% for the six months ended June 30, 2007, due to strong Active Representative growth and increased advertising, as well as favorable foreign exchange. Revenue in Russia in both periods benefited from continued merchandising improvements and the launch of “Hello Tomorrow.” At the end of June 2007, we began providing additional selling opportunities to our Representatives through more frequent brochure distribution which encourages more frequent customer contact. We expect the additional selling opportunities to result in additional revenue and Active Representative growth in Central & Eastern Europe for the second half of 2007 and first half of 2008.

The decrease in operating margin for both periods of 2007 was primarily driven by higher inventory obsolescence expense, higher spending on advertising and RVP, partially offset by lower product costs due to favorable foreign exchange movements. Operating margin for the six months ended June 30, 2007, was also impacted by lower costs to implement restructuring initiatives, which positively impacted operating margin by .9 point.

24

AVON PRODUCTS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in millions, except per share data)

Asia Pacific

	Three Months Ended June 30										Six Months Ended June 30
							%/Point Change										%/Point Change
	2007			2006			US$		Local Currency		2007			2006			US$		Local Currency
Revenue	$	203.0		$	196.3		3	%	(1	)%	$	402.8		$	386.7		4	%	1	%
Operating profit		16.2			12.1		34	%	23	%		37.1			10.0		271	%	255	%
Operating margin		8.0	%		6.2	%	1.8		1.5			9.2	%		2.6	%	6.6		6.4
Units sold									1	%									2	%
Active Representatives									3	%									1	%

Total revenue increased for both periods of 2007, reflecting growth in Active Representatives, as well as favorable foreign exchange. The region’s revenue increase for both periods of 2007 was primarily driven by growth in the Philippines, partially offset by a decline in Taiwan. Revenue in the Philippines for both periods of 2007 increased in the range of 25%, driven by substantial growth in Active Representatives, supported by RVP initiatives, including the roll-out of the Sales Leadership program nationwide, and investments in recruiting advertising, as well as favorable exchange. Revenue in Taiwan declined for both periods of 2007 mainly due to declines in the overall beauty market in this country, reflecting decreased consumer confidence. Japan’s revenue for both periods of 2007 was relatively flat with last year, as growth in sales from direct selling substantially offset lower sales from direct mailing programs.

The increase in operating margin for both periods of 2007 was primarily driven by lower costs to implement restructuring initiatives, which positively impacted operating margin by 4.6 points and 5.7 points for three and six months ended June 30, 2007, respectively. Additionally, the operating margin improvement in both periods of 2007 was due to lower inventory obsolescence expense and lower overhead expenses, primarily due to savings associated with restructuring initiatives, primarily due to position eliminations, partially offset by higher spending on RVP and advertising.

China

	Three Months Ended June 30										Six Months Ended June 30
							%/Point Change										%/Point Change
	2007			2006			US$		Local Currency		2007			2006			US$		Local Currency
Revenue	$	65.0		$	47.9		36	%	30	%	$	133.1		$	95.3		40	%	34	%
Operating profit		(2.0	)		(4.3	)	53	%	54	%		.9			(4.9	)		*		*
Operating margin		(3.1	)%		(9.0	)%	5.9		5.8			.7	%		(5.1	)%	5.8		5.6
Units sold									19	%									17	%
Active Representatives										*										*

* Calculation not meaningful

Total revenue in China increased significantly in both periods of 2007, reflecting further expansion of the direct-selling business, which contributed over one half of the region’s revenue in both periods of 2007. As of June 30, 2007, we had nearly 660,000 certified Sales Promoters reported to the government, approximately 240,000 of whom fit our standard definition of Active Representatives. During 2007, we initiated a removal program for Sales Promoters who have not submitted an order after an extended period of time. At the same time that we have been building on direct selling, we have seen ordering activity levels maintained by our beauty boutiques as they continue to engage in direct selling by servicing our Representatives. Additionally, the number of beauty boutiques has remained stable over the last year. Revenue in both periods of 2007 benefited from the launch of “Hello Tomorrow,” which was supported by significant investments in advertising.

25

AVON PRODUCTS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in millions, except per share data)

The improvement in operating margin for both periods of 2007 was primarily driven by the impact of higher revenue and lower costs to implement restructuring initiatives, which positively impacted operating margin by 3.7 points and 5.2 points for the three and six months ended June 30, 2007, respectively. These positive impacts were partially offset by ongoing higher spending on RVP and fees paid to registered service centers for providing services to our Active Representatives.

Global Expenses

	Three Months Ended June 30								Six Months Ended June 30
	2007			2006			% Change		2007			2006			% Change
Total Global expenses	$	131.7		$	113.7		(16	)%	$	258.1		$	232.5		(11	)%
Allocated to segments		(88.1	)		(76.9	)	15	%		(171.5	)		(150.0	)	14	%
Net Global expenses	$	43.6		$	36.8		(18	)%	$	86.6		$	82.5		(5	)%

The increase in the amount allocated to the segments for both periods of 2007 was primarily due to higher global marketing costs. The increase in net global expenses in both the three and six months ended June 30, 2007, was primarily due to higher professional service fees associated with our PLS initiative and higher incentive-based compensation. Global expenses in the six months ended June 30, 2007 were impacted by lower costs of $18.2 to implement restructuring initiatives. We do not allocate costs of implementing restructuring initiatives related to our global functions to our segments.

26

AVON PRODUCTS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in millions, except per share data)

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of funds historically have been cash flows from operations, commercial paper and borrowings under lines of credit. We currently believe that existing cash, cash from operations (including the impacts of cash required for restructuring initiatives) and available sources of public and private financing are adequate to meet anticipated requirements for working capital, dividends, capital expenditures, the stock repurchase program, possible acquisitions and other cash needs in the short and long term.

We may, from time to time, seek to repurchase our equity or to retire our outstanding debt, in open market purchases, privately negotiated transactions, pursuant to derivative instruments or otherwise. During the last fiscal quarter, we repurchased approximately 7.3 million shares of our common stock for an aggregate purchase price of approximately $280 million. In July of 2007, we commenced repurchasing additional equity pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934 in a stock repurchase plan agreement. Repurchases of common stock pursuant to that agreement will be made in accordance with Rule 10b-18 under the Exchange Act.

Retirements of debt will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors, and the amounts involved may be material. We may also elect to incur additional debt or issue equity or convertible securities to finance ongoing operations, acquisitions or to meet our other liquidity needs. Any issuances of equity securities or convertible securities could have a dilutive effect on the ownership interest of our current shareholders and may adversely impact earnings per share in future periods. Our liquidity could also be impacted by dividends, capital investments and acquisitions. At any given time, we may be in discussions and negotiations with potential acquisition candidates. Acquisitions, by their nature, involve numerous risks and uncertainties.

Inventory levels increased from $900.3 at December 31, 2006, to $1,030.7 at June 30, 2007, partially driven by actions taken in an effort to ensure service levels to our Representatives and due to the impacts of foreign exchange. As previously discussed, our turnaround plan includes initiatives such as PLS and Sales & Operations Planning that are expected to improve inventory levels in the long-term.

Cash Flows

Net Cash (Used) Provided by Operating Activities

Net cash used by operating activities was $.9 during the first six months of 2007 compared to net cash provided by operating activities of $289.4 during the first six months of 2006, primarily due to higher payments for incentive-based compensation in 2007, higher payments for inventory purchases and higher contributions to retirement-related plans in 2007.

We expect full-year 2007 cash flow from operating activities will be in the range of 2006’s level.

Net Cash Used by Investing Activities

Net cash used by investing activities during the first six months of 2007 was $27.6 higher than during the first six months of 2006 resulting from higher capital expenditures and from payments associated with an acquisition of a licensee in Egypt, which was completed in April 2007.

Net Cash Used by Financing Activities

Net cash used by financing activities during the first six months of 2007 was $65.6 higher than during the first six months of 2006, mainly driven by higher repurchases of common stock during the first six months of 2007, partially offset by higher short-term borrowings and higher proceeds from stock option exercises during the first six months of 2007.

The increase in debt maturing within one year primarily relates to commercial paper borrowings.

27

AVON PRODUCTS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in millions, except per share data)

We purchased approximately 10.8 million shares of Avon common stock for $410.1 during the first six months of 2007, as compared to approximately 4.5 million shares of Avon common stock for $137.9 during the first six months of 2006 under our previously announced share repurchase program and through acquisition of stock from employees in connection with tax payments upon vesting of restricted stock units. During the first half of 2007, we have further accelerated the pace of our repurchase program. As of June 30, 2007, we have repurchased approximately $758 under our current $1,000.0 share repurchase program. The Board of Directors reviews repurchase programs and dividends from time to time.

We increased our quarterly dividend payments to $.185 per share in 2007 from $.175 per share in 2006.

Capital Resources

We maintain a $1,000.0 revolving credit and competitive advance facility (the “credit facility”). There were no borrowings under this credit facility as of June 30, 2007.

We also maintain a $1,000.0 commercial paper program, which is supported by the credit facility. There was $629.8 outstanding under this program as of June 30, 2007.

We also maintain a one-year Japanese yen 11.0 billion ($89.9 at the exchange rate on June 30, 2007) uncommitted credit facility and a one-year Euro 50 million ($67.2 at the exchange rate on June 30, 2007) uncommitted credit facility. At June 30, 2007, $89.9 (Japanese yen 11.0 billion) was outstanding under the yen credit facility and there were no borrowings outstanding under the euro credit facility.

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT STRATEGIES

Interest Rate Risk

Our long-term, fixed-rate borrowings are subject to interest rate risk. We use interest rate swaps, which effectively convert the fixed rate on the debt to a floating interest rate, to manage our interest rate exposure. At June 30, 2007 and December 31, 2006, we held interest rate swap agreements that effectively converted approximately 30% of our outstanding long-term, fixed-rate borrowings to a variable interest rate based on LIBOR. Our total exposure to floating interest rates at June 30, 2007 was approximately 60% and at December 31, 2006 was approximately 50%.

Foreign Currency Risk

We operate globally, with operations in various locations around the world. We derive approximately 65% to 75% of our consolidated revenue from operations of subsidiaries outside of the U.S. The functional currency for most of our foreign operations is the local currency. We may reduce our exposure to fluctuations in cash flows associated with changes in foreign exchange rates by creating offsetting positions through the use of derivative financial instruments.

CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR” STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Statements in this report that are not historical facts or information are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “estimate,” “project,” “plan,” “believe,” “may,” “expect,” “anticipate,” “intend,” “planned,” “potential” and similar expressions, or the negative of those expressions, may identify forward-looking statements. Such forward-looking statements are based on management’s reasonable current assumptions and expectations. Such forward-looking statements involve risks, uncertainties and other factors, which may cause the actual results, levels of activity, performance or achievement of Avon to be materially different from any future results expressed or implied by such forward-looking statements, and there can be no assurance that actual results will not differ materially from management’s expectations. Such factors include, among others, the following:

• our ability to implement the key initiatives of and realize the projected benefits from our global business strategy, including our multi-year restructuring initiatives, product mix and pricing strategies, enterprise resource planning, customer service initiatives, product line simplification, strategic sourcing initiative, zero overhead growth and cash management, tax, foreign currency hedging and risk management strategies;

28

AVON PRODUCTS, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Dollars in millions, except per share data)

• our ability to realize the anticipated benefits from our multi-year restructuring initiatives or other strategic initiatives on the time schedules or in the amounts that we expect, and our plans to invest these anticipated benefits ahead of future growth;

• the possibility of business disruption in connection with our multi-year restructuring initiatives or other strategic initiatives;

• our ability to realize sustainable growth from our investments in our brand and the direct selling channel;

• the inventory obsolescence and other costs associated with our product line simplification program;

• our ability to achieve growth objectives, particularly in our largest markets and new and emerging markets;

• our ability to successfully identify new business opportunities and identify and analyze acquisition candidates, and our ability to negotiate and consummate acquisitions as well as to successfully integrate or manage any acquired business;

• the effect of political, legal and regulatory risks, as well as foreign exchange or other restrictions, imposed on us, our operations or our Representatives by governmental entities;

• our ability to successfully transition our business in China in connection with the resumption of direct selling in that market and our ability to operate using the direct selling model permitted in that market;

• the impact of substantial currency fluctuations on the results of our foreign operations;

• general economic and business conditions in our markets, including social, economic and political uncertainties in Latin America, Asia Pacific, Central and Eastern Europe and the Middle East;

• the risk of disruption in Central and Eastern Europe associated with a change to a more rapid selling cycle with more frequent brochures;

• a general economic downturn, information technology systems outages, disruption in our supply chain or manufacturing and distribution operations, or other sudden disruption in business operations beyond our control as a result of events such as acts of terrorism or war, natural disasters, pandemic situations and large scale power outages;

• the risk of product or ingredient shortages resulting from our concentration of sourcing in fewer suppliers;

• the quality, safety and efficacy of our products;

• the success of our research and development activities;

• our ability to attract and retain key personnel and executives;

• competitive uncertainties in our markets, including competition from companies in the cosmetics, fragrances, skin care and toiletries industry, some of which are larger than we are and have greater resources;

• our ability to implement our Sales Leadership program globally, to generate Representative activity, to increase Representative productivity, to improve Internet-based tools for our Representatives, and to compete with other direct selling organizations to recruit, retain and service Representatives;

• the impact of the seasonal nature of our business, changes in market trends, purchasing habits of our consumers and changes in consumer preferences, particularly given the global nature of our business and the conduct of our business in primarily one channel;

• our ability to protect our intellectual property rights;

• the risk of an adverse outcome in our material pending and future litigations;

• our access to financing and ability to secure financing at attractive rates; and

• the impact of possible pension funding obligations, increased pension expense and any changes in pension regulations or interpretations thereof on our cash flow and results of operations.

Additional information identifying such factors is contained in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2006, filed with the U.S. Securities and Exchange Commission. We undertake no obligation to update any such forward-looking statements.

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Avon Products, Inc.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in market risk from the information provided in Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of our 2006 Form 10-K.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, our principal executive and principal financial officers carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934 (the “Exchange Act”). In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management was required to apply its judgment in evaluating and implementing possible controls and procedures. Based upon their evaluation, the principal executive and principal financial officers concluded that our disclosure controls and procedures were effective at June 30, 2007 at the reasonable assurance level. Disclosure controls and procedures are designed to ensure that information relating to Avon (including our consolidated subsidiaries) required to be disclosed by us in the reports we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and to ensure that information required to be disclosed is accumulated and communicated to management to allow timely decisions regarding disclosure.

Changes in Internal Control over Financial Reporting

Management has evaluated, with the participation of our principal executive and principal financial officers, whether any changes in our internal control over financial reporting that occurred during our last fiscal quarter have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on the evaluation we conducted, management has concluded that no such changes have occurred.

We are implementing an Enterprise Resource Planning (“ERP”) system on a worldwide basis, which is expected to improve the efficiency of our supply chain and financial transaction processes. The implementation is expected to occur in phases over the next several years. The implementation of a worldwide ERP system will likely affect the processes that constitute our internal control over financial reporting and will require testing for effectiveness.

We implemented the ERP system in certain countries during 2007. As with any new information technology application we implement, this application, along with the internal controls over financial reporting included in this process, were appropriately tested for effectiveness prior to the implementation in these countries. We concluded, as part of our evaluation described in the above paragraph, that the implementation of ERP in these countries has not materially affected our internal control over financial reporting.

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Avon Products, Inc.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note 5, Contingencies, of the Notes to Consolidated Financial Statements.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c) Repurchases

	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
4/1/07 - 4/30/07	—		$	—	—	$	522,552,000
5/1/07 - 5/31/07	7,316,881	(2)		38.33	7,313,506		242,202,000
6/1/07 - 6/30/07	299	(3)		39.46	—		242,202,000
Total	7,317,180				7,313,506

⁽¹⁾ All of the shares purchased during the second quarter as part of our $1.0 billion share repurchase program, publicly announced on February 1, 2005, consists of shares purchased pursuant to a purchase agreement entered into in May 2007. The program commenced on August 16, 2005 (upon the completion of the previous $1.0 billion share repurchase program) and is scheduled to expire on December 31, 2010.

⁽²⁾ Includes share repurchases under our publicly announced program and 3,375 shares that were repurchased by the Company in connection with employee elections to use shares to pay withholding taxes upon the vesting of their restricted stock units.

⁽³⁾ Includes 299 shares that were repurchased by the Company in connection with employee elections to use shares to pay withholding taxes upon the vesting of their restricted stock units.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a) At the Annual Meeting of Shareholders of Avon, held on May 3, 2007, the matters described under (c) below were voted upon.

(b) Directors elected at the Annual Meeting for a one-year term expiring 2008:

W. Don Cornwell, Edward T. Fogarty, Fred Hassan, Andrea Jung, Maria Elena Lagomasino, Ann S. Moore, Paul S. Pressler, Gary M. Rodkin, Paula Stern and Lawrence A. Weinbach.

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Avon Products, Inc.

(c) Annual Meeting votes:

	For	Against or Withheld	Abstain	Broker Non-Votes
(1) To elect the following Directors to one-year terms expiring in 2008:
W. Don Cornwell	389,148,715	4,635,973	—	—
Edward T. Fogarty	386,190,173	7,594,515	—	—
Fred Hassan	389,135,097	4,649,591	—	—
Andrea Jung	386,045,199	7,739,489	—	—
Maria Elena Lagomasino	369,534,690	24,249,998	—	—
Ann S. Moore	385,968,878	7,815,810	—	—
Paul S. Pressler	389,114,687	4,670,001	—	—
Gary M. Rodkin	388,853,935	4,930,753	—	—
Paula Stern	388,815,803	4,968,885	—	—
Lawrence A. Weinbach	389,253,269	4,531,419	—	—
(2) To ratify the appointment of PricewaterhouseCoopers LLP as Avon’s independent registered public accounting firm for 2007	385,164,141	5,572,245	3,047,301	1,000
(3) To amend the Company’s Restated Certificate of Incorporation and By-laws to implement the adoption of a majority vote standard and to eliminate cumulative voting in the election of directors	298,719,432	69,043,450	3,999,350	22,022,455
(4) A shareholder proposal requesting the benchmarking of incentive compensation goals against peer group performance	99,916,459	264,126,545	4,261,614	25,480,069

ITEM 5. OTHER INFORMATION

(b) In May 2007, certain amendments to the Company’s By-laws were approved by the shareholders, including Section 14, Article III of our By-laws, which sets forth certain qualification criteria for directors. A copy of our By-laws is attached hereto as Exhibit 3.2.

ITEM 6. EXHIBITS

See Exhibit Index.

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Avon Products, Inc.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	AVON PRODUCTS, INC.
	(Registrant)
Date: July 31, 2007	/s/ Richard S. Foggio
	Richard S. Foggio
	Group Vice President, and Corporate Controller
	Signed both on behalf of the registrant and as chief accounting officer.

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Avon Products, Inc.

EXHIBIT INDEX

3.1	Restated Certificate of Incorporation, filed with the Secretary of State of the State of New York on May 3, 2007
3.2	By-laws of Avon, as amended, effective May 3, 2007
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

34

EX-3.1

Exhibit 3.1

RESTATED CERTIFICATE OF INCORPORATION

OF

AVON PRODUCTS, INC.

Under Section 807 of the Business Corporation Law

We, ANDREA JUNG, the Chairman of the Board and Chief Executive Officer of AVON PRODUCTS, INC. (the “Corporation”) and KIM K. AZZARELLI, Vice President, Associate General Counsel and Corporate Secretary of the Corporation, do hereby certify as follows:

1. The name of the Corporation is AVON PRODUCTS, INC. and the name under which the Corporation was formed is California Perfume Company, Inc.

2. The Certificate of Incorporation was filed by the Department of State of the State of New York on January 27, 1916.

3. The Restated Certificate of Incorporation is hereby amended to effect an amendment authorized by the Business Corporation Law.

4. To accomplish the foregoing amendment, Article VI, which established cumulative voting for director elections, has been amended to eliminate cumulative voting and provide for director elections by majority vote, commencing as of the date hereof.

5. The amendment referred to in Paragraph 3 above was authorized by the affirmative vote of at least a majority of the voting power of the Corporation’s outstanding common stock at the May 3, 2007 Annual Meeting of Shareholders.

6. The text of the Certificate of Incorporation of the Corporation is hereby restated and amended to read as herein set forth in full:

ARTICLE I: The corporate name is

AVON PRODUCTS, INC.

ARTICLE II: The purposes for which the Corporation is formed are:

To develop, manufacture, produce, provide, operate, distribute and deal in and with services, property and goods of all kinds including without limitation engaging in the manufacture and distribution of cosmetics and toiletries.

To engage in any lawful act or activity for which corporations may be organized under the Business Corporation Law and the State of New York.

ARTICLE III: The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is 1,525,000,000 shares, divided into two classes consisting of 1,500,000,000 shares of Common Stock, par value $.25 per share (the “Common Stock”), and 25,000,000 shares of Preferred Stock, par value $1.00 per share (the “Preferred Stock”).

The shares of authorized Common Stock of the Corporation shall be identical in all respects and shall have equal rights and privileges.

The Board of Directors shall have authority by resolution to issue the shares of Preferred Stock from time to time on such terms as it may determine and to divide the Preferred Stock into one or more classes or series and, in connection with the creation of any such class or series, to determine and fix by the resolution or resolutions providing for the issuance of shares thereof the designation, powers and relative participating, optional, or other special rights of such class or series, and the qualifications, limitations or restrictions thereof, to the full extent now or hereafter permitted by law.

The holders of capital stock of the Corporation shall not have any preemptive rights.

ARTICLE IIIA: Series B Junior Participating Preferred Stock:

Section 1. Designation and Amount. The shares of such series shall be designated as “Series B Junior Participating Preferred Stock” (the “Series B Preferred Stock”) and the number of shares constituting the Series B Preferred Stock shall be 2,000,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series B Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series B Preferred Stock.

Section 2. Dividends and Distributions.

(A) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series B Preferred Stock with respect to dividends, the holders of shares of Series B Preferred Stock, in preference to the holders of Common Stock, par value $0.25 per share (the “Common Stock”), of the Corporation, and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September

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and December in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of share of Series B Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $10 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series B Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(B) The Corporation shall declare a dividend or distribution on the Series B Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $10 per share on the Series B Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.

(C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series B Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series B Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series B Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding.

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The Board of Directors may fix a record date for the determination of holders of shares of Series B Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof.

Section 3. Voting Rights. The holders of shares of Series B Preferred Stock shall have the following voting rights:

(A) Subject to the provision for adjustment hereinafter set forth, each share of Series B Preferred Stock Shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(B) Except as otherwise provided herein, in any other Certificate of Amendment creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series B Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.

(C) Except as set forth herein, or as otherwise provided by law, holders of Series B Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.

Section 4. Certain Restrictions.

(A) Whenever quarterly dividends or other dividends or distributions payable on the Series B Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series B Preferred Stock outstanding shall have been paid in full, the Corporation shall not:

(i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Stock;

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(ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Preferred Stock, except dividends paid ratably on the Series B Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series B Preferred Stock; or

(iv) redeem or purchase or otherwise acquire for consideration any shares of Series B Preferred Stock, or any shares of stock ranking on a parity with the Series B Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

(B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.

Section 5. Reacquired Shares. Any shares of Series B Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Certificate of Incorporation or in any other Certificate of Amendment creating a series of Preferred Stock or any similar stock or as otherwise required by law.

Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series B Preferred Stock unless, prior thereto, the holders of shares of Series B Preferred Stock shall have received $100 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment provided that the holders of shares of Series B

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Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series B Preferred Stock, except distributions made ratably on the Series B Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series B Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series B Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series B Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

Section 8. No Redemption. The shares of Series B Preferred Stock shall not be redeemable.

Section 9. Rank. The Series B Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all series of any other class of the Corporation’s Preferred Stock.

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Section 10. Amendment. The Certificate of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series B Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series B Preferred Stock, voting together as a single class.

ARTICLE IV: The office of the Corporation is to be located in the City and County of New York, State of New York.

ARTICLE V: The number of directors of the Corporation shall be not less than ten (10) nor more than twenty (20). The number of directors to be chosen within said maximum and minimum limits shall be determined in the manner prescribed by the By-Laws.

Commencing with the 2006 annual meeting of shareholders, directors shall be elected annually at the annual meeting of shareholders, each to hold office until the next succeeding annual meeting or until his or her successor is elected and qualified. Any vacancies in the Board of Directors, by reason of an increase in the number of directors or otherwise, shall be filled solely by the Board of Directors, by majority vote of the directors then in office, though less than a quorum, and any director so elected shall hold office until the next succeeding annual meeting of shareholders. No decrease in the number of directors shall shorten the term of any incumbent director.

Any director may be removed from office as a director but only for cause by the affirmative vote of the holders of eighty percent (80%) of the combined voting power of the then outstanding shares of stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class.

The directors need not be shareholders of the Corporation.

ARTICLE VI: Except as otherwise required by law or by the Restated Certificate of Incorporation, each director shall be elected by the vote of the majority of the votes cast with respect to the director at any meeting for the election of directors at which a quorum is present; provided, however, that if the number of nominees exceeds the number of directors to be elected, the directors shall be elected by the vote of a plurality of the shares represented in person or by proxy at any such meeting and entitled to vote on the election of directors. For purposes of this Article VI, a majority of the votes cast shall mean that the number of shares voted “for” a director’s election exceeds 50% of the votes cast with respect to that director. Votes cast shall include votes to withhold authority and exclude abstentions with respect to that director’s election.

ARTICLE VII:

(A) In addition to any affirmative vote required by law or this Restated Certificate of Incorporation:

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1. any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (a) an Interested Shareholder (as hereinafter defined) or (b) any other corporation (whether or not itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of an Interested Shareholder, or

2. any sale, lease, exchange, mortgage, pledge, grant of a security interest, transfer or other disposition (in one transaction or a series of transactions) to or with (a) an Interested Shareholder or (b) an Affiliate of an Interested Shareholder of assets of the Corporation or any Subsidiary having an aggregate Fair Market Value (as hereinafter defined) of $25,000,000 or more, or

3. the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary, having an aggregate Fair Market Value of $25,000,000 or more to an Interested Shareholder or any Affiliate of an Interested Shareholder in exchange for cash, securities or other property (or combination thereof), or

4. the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Shareholder or any Affiliate of an Interested Shareholder, or

5. any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Shareholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary directly or indirectly beneficially owned by (a) an Interested Shareholder or (b) an Affiliate of an Interested Shareholder shall require either:

(A) the approval of a majority of the Disinterested Directors (as hereinafter defined) or (b) the affirmative vote of the holders of that amount of the voting power of the Voting Stock (as hereinafter defined) equal to the sum of (1) the voting power of the shares of Voting Stock of which their Interested Shareholder is the beneficial owner and (2) a majority of the voting power of the remaining outstanding shares of Voting Stock, voting together as a single class; provided, however, that no such vote shall be required for the purchase by the Corporation of shares of Voting Stock from an Interested Shareholder unless such vote is required by Paragraph (B) of this Article VII.

(B) Any purchase by the Corporation of shares of Voting Stock from an Interested Shareholder, other than pursuant to an offer to the holders of all of the outstanding shares of the same class of Voting Stock as those so purchased, at a per share price in excess of the Market Price (as hereinafter defined), at the time of such purchase,

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of the shares so purchased, shall require the affirmative vote of the holders of that amount of the voting power of the Voting Stock equal to the sum of (i) the voting power of the shares of Voting Stock of which the Interested Shareholder is the beneficial owner (as hereinafter defined) and (ii) a majority of the voting power of the remaining outstanding shares of Voting Stock, voting together as a single class.

(C) It shall be the duty of any Interested Shareholder:

(i) to give or cause to be given written notice to the Corporation, immediately upon becoming an Interested Shareholder, of such person’s status as an Interested Shareholder and of such other information as the Corporation may reasonably require with respect to identifying all owners and amount of ownership of the outstanding Voting Stock of which such Interested Shareholder is the beneficial owner, and

(ii) to notify the Corporation promptly in writing of any change in the information provided in subparagraph (i) of this Paragraph (C), provided, however, that the failure of an Interested Shareholder to comply with the provisions of this Paragraph (C) shall not in any way be construed to prevent the Corporation from enforcing the provisions of Paragraphs (A) and (B) of this Article VII.

(D) For the purposes of this Article VII:

1. “Voting Stock” shall mean the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors.

2. “Person” shall mean any individual, firm, Corporation or other entity.

3. “Interested Shareholder” shall mean any person (other than the Corporation or any Subsidiary) who or which:

a) is the beneficial owner, directly or indirectly of 5% or more of the voting power of the outstanding Voting Stock; or

b) is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 5% or more of the voting power of the then outstanding Voting Stock; or

c) is an assignee of or has otherwise succeeded to the beneficial ownership of any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by an Interested Shareholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933.

For the purposes of determining whether a person is an Interested

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Shareholder, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of subparagraph 4 below but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.

4. A person shall be a “beneficial owner” of any Voting Stock:

a) which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; or

b) which such person or any of its Affiliates or Associates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise or (ii) the right to vote or to direct the voting thereof pursuant to any agreement, arrangement or understanding; or

c) which is beneficially owned, directly or indirectly, by any other person with which such person or its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock.

5. “Affiliate” or “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities and Exchange Act of 1934, as in effect on January 1, 1986.

6. “Subsidiary” shall mean any corporation of which a majority of any class of equity security is owned directly or indirectly, by the Corporation; provided, however, that, for purposes of the definition of Interested Shareholder set forth in subparagraph 3, the term “Subsidiary” shall mean only a corporation of which a majority of the voting power of the capital stock entitled to vote generally in the election of directors is owned, directly or indirectly, by the Corporation.

7. “Disinterested Director” shall mean any member of the Board of Directors of the Corporation who is unaffiliated with an Interested Shareholder and was a member of the Board prior to the time that such Interested Shareholder became an Interested Shareholder, and any successor of a Disinterested Director who is unaffiliated with an Interested Shareholder and is recommended to succeed a Disinterested Director by a majority of Disinterested Directors then on the Board.

8. “Market Price” means the last closing sale price immediately preceding the time in question of a share of the stock in question on the Composite Tape for New York Stock Exchange-Listed Stocks.

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9. “Fair Market Value” means: (i) in the case of stock, the Market Price, and (ii) in the case of property other than cash or stock, the Fair Market Value of such property on the date in question as determined by the Board in good faith.

(E) A majority of the Disinterested Directors shall have the power to determine for the purpose of this Article VII on the basis of information known to them after reasonable inquiry (1) whether a person is an Interested Shareholder, (2) the number of shares of Voting Stock beneficially owned by any person, (3) whether a person is an Affiliate or Associate of another and (4) whether a transaction or series of transactions constitutes one of the transactions specified in Paragraph (A) hereof. The good faith determination of a majority of the Disinterested Directors shall be conclusive and binding for all purposes of this Article VII.

(F) Notwithstanding any other provision of this Restated Certificate of Incorporation or the By-Laws of the Corporation or the fact that a lesser percentage may be specified by law, this Restated Certificate of Incorporation or the By-Laws of the Corporation, the affirmative vote of the holders of at least eighty percent (80%) of the combined voting power of the then outstanding Voting Stock, voting together as a single class, shall be required to amend, alter, repeal or adopt any provision inconsistent with this Article VII.

The Secretary of State is designed as the agent of the Corporation upon whom process in any action or proceeding against it may be served; and the address to which the Secretary of State shall mail a copy of any process against the Corporation which may be served upon him pursuant to law is:

1345 Avenue of the Americas

New York, NY 10105-0196

ARTICLE VIII: No person who is or was a director of the Corporation shall have personal liability to the Corporation or its shareholders for damages for any breach of duty in such capacity, provided that the foregoing shall not limit the liability of any such person (i) if a judgment or other final adjudication adverse to him establishes that his acts or omissions were in bad faith or involved intentional misconduct or a knowing violation of law or that he personally gained, in fact, a financial profit or other advantage to which he was not legally entitled or that his acts violated Section 719 of the Business Corporation Law of New York or, (ii) for any act or omission occurring prior to the adoption of this Article VIII. No amendment to or repeal of this Article VIII shall apply to or have any effect on the liability or alleged liability of any such person to the Corporation for or with respect to any acts or omissions of such person occurring prior to such amendment or repeal. If the Business Corporation Law of New York is amended hereafter to expand or limit the liability of a director, then the liability of a person who is or was a director of the Corporation shall be deemed to be expanded to the extent required or limited to the extent permitted by the Business Corporation Law of New York, as so amended.

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This restatement of the Certificate of Incorporation was authorized by the Board of Directors of the Corporation and the affirmative vote of at least a majority of the voting power of the Corporation’s outstanding common stock.

IN WITNESS WHEREOF, we have subscribed this certificate as of the 3rd day of May, 2007 and we affirm the statements contained herein as true under the penalties of perjury.

/s/Andrea Jung

Andrea Jung, Chairman of the Board and Chief Executive Officer

/s/Kim. K. Azzarelli

Kim K. Azzarelli

Vice President, Associate General Counsel and Corporate Secretary

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EX-3.2

Exhibit 3.2

May 3, 2007

BY-LAWS

OF

AVON PRODUCTS, INC.

ARTICLE I

OFFICES

Section 1. Location. The principal office of the corporation shall be located in the City of New York, County of New York. The post office address to which the Secretary of State shall mail a copy of any process against the corporation served upon him is 1345 Avenue of the Americas, New York, New York 10105.

The corporation may also have other offices at such places either within or without the State of New York as the board of directors may from time to time designate or the business of the corporation may require.

ARTICLE II

MEETINGS OF SHAREHOLDERS

Section 1. Annual Meeting. The annual meeting of the shareholders of the corporation, for the election of directors and the transaction of such other business as may properly come before said meeting, shall be held annually at such place within or without the State of New York as may from time to time be designated by the directors and set forth in the notice of the meeting. The meeting shall be held on the first Thursday in May or on such other date during the months of April or May in each year as may from time to time be designated by the directors and set forth in the notice of the meeting. The chairman of the board of directors, or another member of the board of directors appointed by the chairman, shall be the presiding officer at every meeting of the shareholders of the corporation.

Section 2. Special Meetings. Special meetings of shareholders, unless otherwise prescribed by law, may be called for any purpose or purposes at any time by the chairman of the board or the president or by the order of the board of directors, and special meetings of shareholders prescribed by law for the election of directors shall be called by the board or by the secretary or an assistant secretary upon demand as prescribed by law. Such meetings shall, except as otherwise prescribed by law, be held at such time and place within or without the State of New York as shall be designated by the person, or in the order of the board of directors, calling such meeting.

Section 3. Notice of Meetings. A copy of the notice of every annual and special meeting of shareholders, other than any meeting the giving of notice of which is otherwise prescribed by law, stating the place, date and hour thereof, and in the case of any special meeting, indicating that it is being issued by or at the direction of the person or persons calling the meeting and setting forth the purposes for which the meeting is called, shall be given personally, electronically, or mailed, at least ten but not more than fifty days before such meeting, to each shareholder of record entitled to vote thereat. If sent electronically, such notice shall be directed to the e-mail address provided by the shareholder in writing. If mailed, such copy shall be deposited in the United States mail with postage thereon prepaid, directed to each such shareholder at his address as the same appears on the record of shareholders of the corporation or, if he shall have filed with the secretary of the corporation a written request that notices to him be mailed to some other address, then directed to him at such other address. If any meeting, annual or special, action is proposed to be taken which would, if taken, entitle shareholders fulfilling the requirements of law to receive payment for their shares, the notice of the meeting shall include a statement of that purpose and to that effect.

Section 4. Quorum. At all meetings of shareholders, except as otherwise expressly provided by law, there shall be present either in person or by proxy shareholders of record holding at least a majority of the shares entitled to vote at such meetings in order to constitute a quorum, but less than a quorum shall have the power to adjourn any meeting until a quorum shall be present. The presiding officer at any meeting of shareholders may adjourn such meeting at any time for the purpose of determining whether a quorum is present or for any other reason. When a quorum is once present to organize a meeting, it is not broken by the subsequent withdrawal of any shareholders.

Section 5. Voting. At every meeting of shareholders every shareholder of record shall be entitled to one vote for every share standing in his name on the record of shareholders on any matter to be voted upon at such meeting, unless otherwise provided in the certificate of incorporation, and may exercise such voting right either in person or by proxy, except that no proxy shall be voted on after eleven months from its date unless otherwise provided in the proxy. No share of stock shall be voted at any meeting by any person other than (i) the owner thereof registered as such on the corporation’s books on

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the record date fixed by the directors, or (ii) the duly appointed proxy of such registered owner. Any vote for directors and/or proposals that shall be presented at a shareholders’ meeting may be by written, telephonic or electronic means. This includes, but is not limited to, written ballots, telegrams, cablegrams, facsimile or internet transmissions, provided that such electronic transmissions are submitted with proof that such electronic transmission is authorized by the shareholder.

Section 6. Inspectors of Voting. The board of directors, in advance of any shareholders’ meeting, may appoint one or more inspectors to act at the meeting or any adjournment thereof. If inspectors are not so appointed, the person presiding at a shareholders’ meeting may, and on the request of any shareholder entitled to vote thereat shall, appoint one or more inspectors. In case any person appointed fails to appear or act, the vacancy may be filled by appointment made by the board of directors in advance of the meeting or at the meeting by the person presiding thereat. Inspectors, none of whom shall be an officer, director or a candidate for the office of director, shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall determine and report to the meeting as to the results of all voting (by ballot or otherwise) on all matters submitted to a vote at the meeting. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability.

Section 7. Voting List of Shareholders. A list of shareholders as of the record date, certified by the corporate officer responsible for its preparation or by a transfer agent, shall be produced at any meeting of shareholders upon the request thereat or prior thereto of any shareholder. If the right to vote at any meeting is challenged, the inspectors of election, or person presiding thereat, shall require such list of shareholders to be produced as evidence of the right of the persons challenged to vote at such meeting, and all persons who appear from such list to be shareholders entitled to vote thereat may vote at such meeting.

Section 8. Conduct of Meetings of Shareholders. Subject to the following and any other provisions of the corporation’s certificate of incorporation or by-laws, meetings of shareholders generally shall follow accepted rules of parliamentary procedure, as determined by the presiding officer at such meeting.

(a) The presiding officer of the meeting shall have absolute authority over matters of procedure, and there shall be no appeal from the ruling of the presiding officer. If the presiding officer, in his absolute discretion, deems it advisable to dispense with the rules of parliamentary procedure as to any meeting or any part thereof, the presiding officer shall so state and shall also state the rules under which the meeting or any part thereof shall be conducted.

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(b) In order to prevent disruption or disorder which could interfere with the conduct of the business of the meeting or for any other reason deemed necessary or advisable, the presiding officer at any meeting may, in his sole discretion, quit the chair and announce the adjournment of the meeting; and upon his so doing, the meeting is thereupon adjourned.

(c) Any other motion for adjournment, if otherwise properly made, other than a motion to adjourn at the close of business of the meeting or a motion to adjourn for the purpose of tabulating votes or proxies, shall be disposed of by a per share vote.

(d) The presiding officer of the meeting may require that any person not a bona fide shareholder of record or the proxy of a bona fide shareholder of record leave the meeting.

(e) A resolution or motion shall be considered for a vote at a meeting only if (i) proposed by a bona fide shareholder of record or a duly authorized proxy of such a shareholder of record, (ii) seconded by a bona fide shareholder of record or a duly authorized proxy of such a shareholder of record (other than the individual proposing the resolution or motion) and (iii) such resolution or motion is ruled in order by the presiding officer of the meeting in his sole discretion, which order shall not be appealable.

(f) At any meeting called for the election of directors, the polls shall be opened and closed at the times and in the manner directed by the presiding officer of such meeting. Once the presiding officer has announced the closing of the polls, no further voting shall be permitted.

Section 9. Notice of Proposed Shareholder Business.

(a) A proposal of business to be considered by the shareholders at an annual meeting of shareholders (“annual meeting”) may be made (i) pursuant to the corporation’s notice of meeting, (ii) by or at the direction of the board of directors or (iii) by any shareholder of the corporation who was a shareholder of record at the time of giving notice provided for in this Section 9, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 9.

(b) For an item of business to be properly brought before an annual meeting by a shareholder pursuant to clause (iii) of paragraph (a) of this Section 9, the shareholder must have given timely notice thereof in writing to the secretary of the corporation and such item of business must otherwise be a proper matter for shareholder action. To be timely, a shareholder’s notice shall be delivered to the secretary at the principal office of the corporation not later than the close of business on the 90th day nor earlier than the

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close of business on the 120th day prior to the first anniversary of the preceding year’s annual meeting. In the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the shareholder to be timely must be so delivered not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by the corporation. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a shareholder’s notice as described above. Such shareholder’s notice shall set forth (i) a brief description of the business desired to be brought before the meeting, the reasons for considering such business at the meeting and any material interest in such business of such shareholder and the beneficial owner, if any, on whose behalf the proposal is made and (ii) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is made, (A) the name and address of such shareholder, as they appear on the corporation’s books, and of such beneficial owner, and (B) the class and number of shares of the corporation which are owned beneficially and of record by such shareholder and such beneficial owner.

(c) Only such business shall be conducted at an annual meeting as shall have been brought before the meeting in accordance with the procedures set forth in this Section 9. Except as otherwise provided by law, the presiding officer of the meeting shall have the power and duty to determine whether any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the notice procedures set forth in this Section 9 and, if any proposed business is not in compliance with this Section 9, to declare that such proposal shall be disregarded.

(d) For purposes of this Section 9, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”).

(e) Notwithstanding the foregoing provisions of this Section 9, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 9. Nothing in this Section 9 shall be deemed to adversely affect any rights of shareholders to request inclusion of proposals in the corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

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ARTICLE III

DIRECTORS

Section 1. Number, Election and Terms. The number of the directors constituting the entire board of directors shall be not less than ten (10) nor more than twenty (20). Subject to such limitation the number shall be fixed by the board of directors.

Commencing with the 2006 annual meeting of shareholders, directors shall be elected annually at the annual meeting of shareholders, to hold office until the next succeeding annual meeting. Except as otherwise provided by law, by the certificate of incorporation, or by the by-laws of this corporation, the directors shall be elected by ballot at the annual meeting of shareholders by a plurality of the votes of the shareholders cast in person or by proxy at such election. In voting for the election of directors, shareholders shall be entitled to cumulative voting. Each director shall be elected to serve until the expiration of his or her term or until his or her successor shall have been elected and qualified except in the event of the death, resignation or removal or the earlier termination of the term of office of any such director. Each director shall be at least 21 years of age. It is not necessary for a director to be a shareholder of the corporation.

Section 2. Newly Created Directorships and Vacancies. Newly created directorships resulting from any increase in the number of directors and any vacancies on the board of directors resulting from death, resignation, disqualification, removal or other cause shall be filled only by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the board of directors. Any director elected in accordance with the preceding sentence shall hold office until the next meeting of shareholders at which the election of directors is in the regular order of business, and until such director’s successor shall have been duly elected and qualified. No decrease in the number of directors constituting the board of directors shall shorten the term of any incumbent director.

Section 3. Removal. Any director, or the entire board of directors, may be removed from office at any time only for cause and only by the affirmative vote of the holders of at least eighty percent of the voting power of all shares of the corporation entitled to vote generally in the election of directors, voting together as a single class.

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Section 4. Powers and Duties of the Board of Directors. Except as otherwise provided by law or by the certificate of incorporation, the business of the corporation shall be managed by the board of directors, which may adopt such rules and regulations for that purpose and for the conduct of its meetings as it may deem proper. The board of directors may have one or more offices and keep the books, records and minutes of the corporation, except such records as are required to be kept in the State of New York, at such places as it may from time to time determine. Any of such records may be in written form or in any other form capable of being converted into written form within a reasonable time. In addition to the powers and authority expressly conferred upon it by these by-laws, the board of directors may exercise all such powers of the corporation and do all such lawful acts and things as are allowed by the certificate of incorporation or by law.

Section 5. First Meeting of the Board of Directors. The first meeting of the board of directors to be held after an annual meeting of shareholders for the election of directors shall be called and held for the purposes of organization, the election or appointment of officers and the transaction of such other business as may be stated in the notice thereof. The first meeting shall be held at such time and place as shall be fixed in written notice mailed to each newly elected director at his last known post office address at least two days prior to such meeting.

Section 6. Regular Meetings. Regular meetings of the board of directors shall be held at such time and place within or without the State of New York as may be determined by resolution of the board, and no notice shall be required for any regular meeting. Except as otherwise provided by law, any business may be transacted at any regular meeting.

Section 7. Special Meetings. Special meetings of the board of directors may, unless otherwise prescribed by law, be called from time to time by the chairman of the board or the president. Upon the written request directed to the chairman of the board, president or the secretary of a majority of the directors stating the time, place and purposes of such special meeting, the chairman of the board, president or the secretary shall call a special meeting of the board of directors. Special meetings of the board of directors shall be held at the place where regular meetings of the board are held unless otherwise fixed by the board.

Section 8. Notice of Special Meetings. Notice of the time, place and purpose of each special meeting of the board of directors, other than any meeting the giving of notice of which is otherwise prescribed by law, shall be given to each director at least two hours prior to such meeting. For the purpose of this Section, notice will be deemed to be duly given to a director if given to him orally (including by telephone) or if such notice be

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delivered to such director in person or be mailed, sent by facsimile transmission, or cabled to his address as it appears upon the books of the corporation or to the address last made known in writing to the secretary of the corporation by such director as the address to which such notices are to be given.

Section 9. Quorum. At each meeting of the board of directors, one-half (1/2) of the entire board shall constitute a quorum for the transaction of business, except as provided in Section 2 of this Article III but less than a quorum may, without notice other than announcement at the meeting, adjourn a meeting until a quorum shall be present. Every act of a majority of the directors present at any meeting or adjourned session of a meeting at which there is a quorum shall be the act of the board of directors.

Section 10. Compensation of Directors and Members of Committees. The board of directors may from time to time, in its discretion, fix the amount which shall be payable to members of the board of directors and to members of any committee for attendance at the meetings of the board or of such committee and for services rendered to the corporation. A director or member of the committee may serve the corporation in any other capacity and receive compensation therefor.

Section 11. Meetings by Communication Equipment. The board of directors or any committee of the board may hold a meeting by means of conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at the meeting.

Section 12. Nomination of Director Candidates. Nominations for the election of directors may be made by the board of directors or a proxy committee appointed by the board of directors or by any shareholder entitled to vote in the election of directors generally. However, any shareholder entitled to vote in the election of directors generally may nominate one or more persons for election as directors at a meeting only if written notice of such shareholder’s intent to make such nomination is given to the secretary of the corporation not later than (i) with respect to an election to be held at an annual meeting of shareholders, 60 days in advance of such meeting, and (ii) with respect to an election to be held at a special meeting of shareholders for the election of directors, the close of business on the seventh day following the date on which notice of such meeting is first given to shareholders. Each such notice shall set forth: (a) the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the shareholder is a holder of record of common stock of the corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to

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which the nomination or nominations are to be made by the shareholder; (d) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated, or intended to be nominated, by the board of directors; and (e) the consent of each nominee to serve as a director of the corporation if so elected. The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure.

Section 13. Procedures in Uncontested Elections of Directors. In an uncontested election of directors (subject to Article VI of the certificate of incorporation), if a nominee who is an incumbent director is not elected and no successor has been elected at such meeting, the director shall promptly tender his or her resignation to the Board of Directors in accordance with the agreement contemplated by Section 14 of these By-Laws. The Nominating and Corporate Governance Committee shall make a recommendation to the Board of Directors on whether to accept or reject the tendered resignation, or whether other action should be taken. The Board of Directors shall act on the tendered resignation, taking into account the Committee’s recommendation and publicly disclose (in a press release, a filing with the Securities and Exchange Commission or other broadly disseminated means of communication) its decision regarding the tendered resignation and the rationale behind the decision within 90 days from the date of the certification of the election results.

The Nominating and Corporate Governance Committee in making its recommendation, and the Board of Directors in making its decision, may each consider any factors or other information that it considers appropriate and relevant. The director who tenders his or her resignation shall not participate in the recommendation of the Nominating and Corporate Governance Committee or the decision of the Board of Directors with respect to his or her resignation. If such incumbent director’s resignation is not accepted by the Board of Directors, such director shall continue to serve until the end of his or her term and until his or her successor is duly elected, or his or her earlier resignation or removal. If a director’s resignation is accepted by the Board of Directors pursuant to this By-Law, or if a nominee for director is not elected and the nominee is not an incumbent director, then the Board of Directors, in its sole discretion, may fill any resulting vacancy pursuant to the provisions of Section 2 of Article III of these By-Laws or may decrease the size of the Board of Directors pursuant to the provisions of Section 1 of Article III of these By-Laws and Section 702 of the Business Corporation Law of the State of New York.

Section 14. Submission of Questionnaire, Representation and Agreement. To be eligible to be a nominee for election or reelection as a director of the Corporation, a person must deliver (in accordance with the time periods prescribed for delivery of notice under Section 12 of these By-Laws) to the Secretary at the principal executive offices of

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the Corporation a written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (which questionnaire shall be provided by the Secretary upon written request) and a written representation and agreement (in the form provided by the Secretary upon written request) that such person (a) will abide by the requirements of Section 13 of these By-Laws, (b) is not and will not become a party to (1) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (2) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law, and (c) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein.

ARTICLE IV

COMMITTEES OF THE BOARD OF DIRECTORS

Section 1. Committees. The board of directors, by resolution or resolutions passed by a majority of the entire board, may designate from among its members various committees, each consisting of three or more of the directors, and each of which, to the extent provided in said resolution or resolutions, shall have and may exercise such powers and authority as may be specified by the board of directors, except that no such committee shall have authority as to (1) the submission to shareholders of any action that needs shareholders’ authorization under law, (2) the filling of vacancies in the board or in any committee, (3) the fixing of compensation of the directors for serving on the board or on any committee, (4) the amendment or repeal of the by-laws, or the adoption of new by-laws, or (5) the amendment or repeal of any resolution of the board which by its terms shall not be so amendable or repealable. The board of directors may designate one or more directors as alternate members of any such committee. Each such committee and the members thereof shall serve at the pleasure of the board of directors.

Section 2. Standing Committees. There shall at all times be at least three standing committees of the board of directors, namely an audit committee, a compensation committee, and a nominating committee, each of which shall consist of three or more directors, none of whom may be a current or former officer or employee of the corporation. The compensation committee shall, in addition to such other duties as the board of directors may specify, administer the corporation’s 1993 Stock Incentive Plan

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and be responsible for reviewing and approving all stock option awards or other forms of stock incentive awards, whether or not granted pursuant to that plan.

Section 3. General Rules. At each meeting of a committee, one-third of the entire committee, but not less than two (2) members, shall constitute a quorum for the transaction of business. Notice of the time and place of each committee meeting shall be subject to the same notice rules as are applicable to special meetings of the board of directors, except that no notice of the purpose of a committee meeting need be stated. Any action required or permitted to be taken at any meeting of a committee of the board of directors may be taken without a meeting if all members of such committee consent to such action in writing and such writing or writings are filed with the minutes of proceedings of the committee. Except as otherwise provided in this Article IV, each committee of the board of directors may adopt its own rules of procedure, may meet at stated times or on such notice as the committee may determine and shall keep regular minutes of its proceedings and report the same to the board of directors when required.

ARTICLE V

OFFICERS

Section 1. Number and Designation. The officers of the corporation will consist of a chairman of the board, a president, one or more vice presidents, a treasurer and a secretary and such other officers as the board of directors may elect, including, but not limited to, one or more “executive” vice presidents, “senior” vice presidents or “group” vice presidents. Any two offices may be held by one person, except that the chairman of the board or president may not also be the secretary, and except that, where the by-laws or resolutions of the board of directors provide for signatures of the incumbents of two offices of the corporation upon certificates for shares, notes, checks or other instruments or documents issued by the corporation, such offices must be held by two separate persons.

Section 2. Election. The board of directors shall, at their first meeting after their election, elect a chairman of the board and a president from their number and shall also elect one or more vice-presidents, a secretary and a treasurer who need not be members of the board of directors, but in the event of the failure of the board so to elect any officer, such officer may be elected at any subsequent meeting of the board. Each officer so elected shall hold office until the first meeting of the board of directors following the next annual meeting of shareholders for the election of directors and until his successor is elected, except in the event of his death, resignation or removal or the earlier termination of his term of office, and except that the terms of office of all vice-presidents shall terminate with each annual election of officers at which any vice-president is elected.

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Any vacancy in an office may be filled for the unexpired portion of the term of such office by the board of directors at any regular or special meeting. The board of directors may also elect other officers, including a controller, who need not be members of the board of directors, and may prescribe, and from time to time change, their respective powers and duties, except as the powers and duties of the controller are prescribed by these by-laws. Each officer so elected shall hold office at the pleasure of the board of directors.

Section 3. Chairman of the Board. The chairman of the board who need not be a member of management shall preside at all meetings of the shareholders and of the board of directors. He shall perform such other duties as may be required in the management of the business, or if he is not a member of management, as may be prescribed by the board.

Section 4. The President. The president shall have the general powers and duties of supervision and management of the corporation. In the absence or incapacity of the chairman of the board, he shall also preside at all meetings of the shareholders and of the board of directors.

Section 4A. The function of chief executive officer, and chief operating officer of the corporation, shall be discharged by such officer or officers as the board of directors may from time to time designate.

Section 5. Vice Presidents. Each vice-president, including any executive vice presidents, senior vice presidents and/or group vice presidents, shall have such powers and shall perform such duties as may be assigned to him by the board, the chairman of the board or the president.

Section 6. The Treasurer. The treasurer shall have the care and custody of all the funds and securities of the corporation and shall deposit the same in the name of the corporation in such bank or banks, trust company or trust companies and in such safe deposit company or companies as the board of directors may designate. He shall be responsible for the disbursement of funds of the corporation and shall perform the duties and exercise all the powers usually incidental to the office of the treasurer and such other duties as from time to time may be assigned to him by the board, the chairman of the board or the president.

Section 7. The Secretary. The secretary shall keep the minutes and act as secretary of all meetings of the board of directors and of the shareholders. He shall attend to the giving and serving of all notices of the corporation. He shall be the custodian of the records and of the corporate seal of the corporation. He shall attend to such correspondence as may be assigned to him and perform all the duties incidental to his

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office. He shall be empowered to affix the corporate seal to all documents, execution of which, on behalf of the corporation, under its seal, is duly authorized and when so affixed may attest the same; and, in general, he shall perform the duties and exercise all the powers usually incidental to the office of a secretary of a corporation, and such other duties as, from time to time, may be assigned to him by the board, the chairman of the board or the president.

Section 8. The Controller. The controller shall maintain and supervise proper books and records of all assets, liabilities, disbursements and transactions of the corporation. He shall prepare such financial statements and reports as shall be required, and shall perform such other duties as from time to time may be assigned to him by the board, the chairman of the board or the president.

Section 9. Appointed Officers. The chief executive officer of the corporation may from time to time appoint one or more officers with the title of vice president with such powers and duties as the chief executive officer may specify. The chief executive officer may from time to time also appoint (a) one or more assistant treasurers who may perform some or all of the duties and powers usually incidental to the treasurer, (b) one or more assistant secretaries who may perform some or all of the duties and powers usually incidental to the secretary and (c) one or more assistant controllers who may perform some or all of the duties assigned to the controller. Any of said appointed officers may be removed at any time by the chief executive officer. The chief executive officer or the president also may appoint one or more officers of operating business units or divisions of the corporation, who shall not be officers of the corporation, but shall have such powers and duties as the chief executive officer, president or the head of the operating business unit or division shall specify. Any appointed officers of operating business units or divisions may be removed at any time by the chief executive officer, the president, or the head of the business unit or division to whom such appointed officer reports.

Section 10. Stockholder Consents and Proxies. The chief executive officer, president, treasurer and secretary of the corporation or any one of them or their designees, shall have the power and authority on behalf of the corporation to execute any consents or proxies, authorizing any person to attend and act and vote in person or by proxy at any meetings of the stockholders or members of any corporation or other entity in which the corporation owns stock or otherwise has an ownership interest, or to attend such meetings themselves, and at any such meetings they or their designees or proxies, as the case may be, shall possess and may exercise any and all rights and powers incidental to such ownership as the corporation as the owner thereof might have possessed and executed if present.

Section 11. Delegation of Duties of Officer. The board of directors may delegate the duties and powers of any officer, agent or employee of the corporation to any

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other officer, agent or employee or director for a specified time during the absence of any such person or for any other reason that the board may deem sufficient.

Section 12. Removal. Any officer of the corporation elected or appointed by the board of directors may be removed by the board with or without cause.

Section 13. Bond. The board of directors shall have power, to the extent permitted by law, to require any officer, agent or employee of the corporation to give bond for the faithful discharge of his duties in such form and with such surety or sureties as the board may deem advisable.

ARTICLE VI

CAPITAL SHARES

Section 1. Form. The certificates for shares shall be in such forms as may be prescribed by law and as shall be approved by the board of directors.

Section 2. Issuance. All certificates for shares shall be signed by the chairman of the board or the president or a vice-president and the secretary or an assistant secretary or the treasurer or an assistant treasurer and shall have the seal of the corporation affixed thereto. Such seal may be a facsimile, engraved or printed. Where any such certificate is countersigned by a transfer agent or registered by a registrar, other than the corporation itself or its employee, the signatures of any such officers or assistant officers upon such certificate may be facsimiles, engraved or printed.

Section 3. Transfer. The board of directors shall have the power and authority to make such rules and regulations as it may deem expedient concerning the issue, registration and transfer of certificates for shares, and may appoint transfer agents or clerks and registrars thereof.

Section 4. Fixing of Record Date. The board of directors may at any time fix a record date not more than fifty nor less than ten days prior to (a) the date of any meeting of shareholders or (b) the last day on which the shareholders are entitled to express consent or dissent from any proposal without a meeting, as the date as of which shareholders entitled to notice of or to vote at such a meeting, or whose consent or dissent is required or may be expressed, for any purpose, as the case may be, shall be determined, and, except as otherwise provided by law, all persons who were the holders of record of voting shares at such date and no others shall be entitled to notice of and to vote at such meeting or to express their consent or dissent, as the case may be. The board of directors may at any time fix a record date not exceeding fifty days prior to the date fixed for the

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payment of any dividend or the making of any distribution or for the delivery or allotment of evidences of rights or evidences of interest arising out of any change, conversion, or exchange of capital shares, as the date for the determination of the shareholders entitled to receive any such dividend, distribution, rights or interest, and in any such case only shareholders of record at the date so fixed shall be entitled to receive such dividend, distribution, rights or interest.

ARTICLE VII

NEGOTIABLE INSTRUMENTS, CONTRACTS, ETC.

Section 1. Signatures on Checks, etc. All checks, drafts, bills of exchange, notes or other obligations or orders for the payment of money shall be signed in the name of the corporation by such officer or officers, person or persons, as the board of directors may from time to time designate by resolution.

Section 2. Execution of Contracts, Deeds, etc. The board of directors or any committee given specific authority in the premises, or given authority to exercise generally the powers of the board during the interval between meetings of the board to the extent permitted by law, may authorize any officer or officers, agent or agents, in the name of and on behalf of the corporation, to enter into or execute and deliver any and all deeds, bonds, mortgages, contracts and other obligations or instruments and to vote on behalf of the corporation shares of stock of other domestic or foreign corporations standing in the name of the corporation, and such authority may be general or confined to specific instances.

ARTICLE VIII

CORPORATE SEAL

Section 1. Description. The seal of the corporation shall be circular in form with the name of the corporation in the circumference and the words and figures “Corporate Seal—1916—N.Y. “ in the center.

ARTICLE IX

FISCAL YEAR

Section 1. Definition. The fiscal year of this corporation shall be from the first day of January to the thirty-first day of December, inclusive, in each year or such other twelve consecutive months as the board of directors may by resolution designate.

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ARTICLE X

WAIVER OF NOTICE

Section 1. Meetings Held on Waiver. Whenever any notice is required to be given under the provisions of these by-laws, or of the certificate of incorporation, or of any of the laws of the State of New York, a waiver thereof, in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent thereto. The attendance of any shareholder at a meeting, in person or by proxy, without protesting prior to the conclusion of the meeting the lack of notice of such meeting, shall constitute a waiver of notice by him.

ARTICLE XI

AMENDMENTS

Section 1. By the Shareholders. Except as otherwise provided by law, these by-laws may be amended or repealed or new by-laws may be adopted at any meeting of the shareholders of the corporation by the affirmative vote of shareholders holding of record a majority of the issued and outstanding shares entitled to vote, represented either in person or by proxy, provided notice of the proposed amendment be contained in the notice or waiver of notice of such meeting.

Section 2. By the Board of Directors. Except as otherwise provided by law, these by-laws may be amended at any meeting of the board of directors of the corporation at which a quorum is present by the affirmative vote of a majority of the directors present at such meeting, provided notice of the proposed amendment is contained in the notice or waiver of notice of such meeting.

Section 3. All By-Law Amendments. Notwithstanding anything contained in these by-laws to the contrary, the affirmative vote of the holders of at least eighty percent of the voting power of all shares of the corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend or repeal Sections 1, 2, 3 or 12 of Article III, or this Section 3 of this Article XI.

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ARTICLE XII

INDEMNIFICATION

Section 1. Indemnification – Third Party and Derivative Actions.

(a) The corporation shall indemnify any person made, or threatened to be made, a party to an action or proceeding, whether civil or criminal (other than one by or in the right of the corporation to procure a judgment in its favor), including an action by or in the right of any other corporation of any type or kind, domestic or foreign, or any partnership, joint venture, trust, employee benefit plan or other enterprise, which any director, officer or employee of the corporation served in any capacity at the request of the corporation, by reason of the fact that he is or was a director or officer of the corporation, or is or was serving such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity, against judgments, fines, including excise taxes, amounts paid in settlement and expenses, including attorneys’ fees, incurred in connection with any such action or proceeding, or any appeal therein, provided that no indemnification may be made to or on behalf of such person if a judgment or other final adjudication adverse to such person establishes that (i) his acts were committed in bad faith or were the result of his active or deliberate dishonesty and were material to such action or proceeding or (ii) he personally gained in fact a financial profit or other advantage to which he was not legally entitled.

(b) The corporation shall indemnify any person made, or threatened to be made, a party to an action by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of any other corporation of any type or kind, domestic or foreign, or of any partnership, joint venture, trust, employee benefit plan or other enterprise, against amounts paid in settlement and expenses, including attorneys’ fees, incurred in connection with such action, or any appeal therein, provided that no indemnification may be made to or on behalf of such person if (i) his acts were committed in bad faith or were the result of his active and deliberate dishonesty and were material to such action or (ii) he personally gained in fact a financial profit or other advantage to which he was not legally entitled.

(c) The termination of any civil or criminal action or proceeding by judgment, settlement, conviction or upon a plea of nolo contendere, or its equivalent, shall not in itself create a presumption that any such person has not met the standard of conduct set forth in this Section 1.

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Section 2. Payment of Indemnification; Repayment.

(a) A person who has been successful, on the merits or otherwise, in the defense of a civil or criminal action or proceeding of the character described in Section 1 of this Article shall be entitled to indemnification as authorized in such Section.

(b) Any indemnification under Section 1 of this Article, unless ordered by a court, shall be made by the corporation in such manner as provided by law.

(c) Expenses incurred by a person referred to in Section 1 of this Article in defending a civil or criminal action or proceeding shall be paid by the corporation in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount in case he is ultimately found, in accordance with this Article, not to be entitled to indemnification or, where indemnity is granted, to the extent the expenses so paid exceed the indemnification to which he is entitled.

(d) Any indemnification of a person under Section 1 of this Article, or advancement of expenses under Section 2(c) of this Article, shall be made promptly, and in any event within 60 days, upon the written request of such person.

Section 3. Enforcement; Defenses. The right to indemnification or advancement of expenses granted by this Article shall be enforceable by the person in question in any court of competent jurisdiction if the corporation denies such request, in whole or in part, or if no disposition thereof is made within 60 days. Such person’s expenses incurred in connection with successfully establishing his right to indemnification, in whole or in part, in any such action shall also be indemnified by the corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advancement of expenses under Section 2(c) of this Article where the required undertaking has been received by the corporation) that the claimant has not met the standard of conduct set forth in Section 1 of this Article, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation to have made a determination that indemnification of the claimant is proper, nor the fact that there has been an actual determination by the corporation that indemnification of the claimant is not proper, shall be a defense to the action or create a presumption that the claimant is not entitled to indemnification.

Section 4. Survival; Savings Clause; Preservation of Other Rights.

(a) The foregoing indemnification provisions shall be deemed to be a contract between the corporation and each person who serves in such capacity at any time while these provisions as well as the relevant provisions of the New York Business Corporation

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Law are in effect and any repeal or modification thereof shall not affect any right or obligation then existing with respect to any state of facts then or previously existing or any action or proceeding previously or thereafter brought or threatened based in whole or in part upon any such state of facts. Such a contract right may not be modified retroactively without the consent of such person.

(b) If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each such person against judgments, fines, amounts paid in settlement and expenses, including attorneys’ fees, incurred in connection with any actual or threatened action by or in the right of the corporation, or any appeal therein, to the full extent permitted by any applicable portion of this Article that shall not have been invalidated and to the full extent permitted by applicable law.

(c) The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any by-law, agreement, vote of shareholders or directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer or employee of the corporation and shall inure to the benefit of the heirs, executors and administrators of such a person. The corporation is hereby authorized to provide further indemnification if it deems it advisable by resolution of shareholders or directors, by amendment of these by-laws or by agreement.

*     *     *

For purposes of these by-laws, the masculine pronoun means the feminine and the singular means the plural whenever appropriate.

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, Andrea Jung, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Avon Products, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 31, 2007

/s/ Andrea Jung

Andrea Jung

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Charles W. Cramb, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Avon Products, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 31, 2007

/s/ Charles W. Cramb

Charles W. Cramb

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Avon Products, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Andrea Jung, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Andrea Jung

Andrea Jung

Chief Executive Officer

July 31, 2007

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Avon Products, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Charles W. Cramb, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Charles W. Cramb

Charles W. Cramb

Chief Financial Officer

July 31, 2007